Literalism

Literalism can refer to any fundamentalist religious belief based on any scripture.

The key feature of literalism is that scripture is assumed to be a literal depiction of historical events instead of allegory. This interpretation necessitates the existence of supernatural beings and forces that are incompatible with materialism. It also flies in the face of every lesson ever taught by an English teacher.

Any reading of scripture as allegory is potentially compatible with the pantheistic universalist interpretation of god, as long as those allegories are interpreted as references to things in the material universe.

See Biblical Literalism on Wikipedia.

Doctrine of Inerrancy

Literalism can more precisely be described as Inerrancy, which acknowledges the fundamental nature of language while still claiming that scripture is historically and factually correct.

Here's a great podcast that dives into the theology behind this. SWAJ - The Proof of Inerrancy

Most Believers Aren't Literalists

Religion and spirituality are not the opponents of truth, as atheists would claim. The only opponent is literalism. Most religious practitioners are not literalists, as the chart below shows.

A coalition of non-literalists would be enough to form a supermajority. [1] [2]

While there is not survey data that distinguishes between literalist and non-literalist atheists, it is useful to make this distinction. Those atheists that consider most believers to be literalists, and the mythological interpretation of scripture to be the correct one, tend to be more anti-religious. The ones that acknowledge the allegories may describe themselves more as "spiritual but not religious," and form a much larger percentage of the population.