What does Holden mean you are quite illiterate but holden read a lot?

First, we have to remember that we can't always trust what Holden tells us; he does lie and admits doing so. Here, however, he means that he isn't as well educated as he thinks he ought to be--he hasn't read, for instance, the books he's been assigned in school perhaps--but he does like to read. His favorite books include Out of Africa, a book that he got by mistake. Any book whose author he believes he could just pick up the phone and talk to is one he thinks he would enjoy. In Chapter 3, he mentions two other books he likes: Return of the Native and Of Human Bondage; both of these are challenging, serious novels that a truly illiterate person could not read.