There seems to be a renewed wave of attack on the use of "literally" in situations where "figuratively" is more appropriate. A couple of my friends shared two articles on Google reader, including an xkcd which literally rips apart such usage (actually that should be "figuratively rips apart..." but I shall shortly prove why using literally is also not so bad).
Think of your average metaphor - "Maccha Royal Challengers got screwed like a *&^% da"
Think of how you say it if you were even more excited about this - "Maccha Royal Challengers really got screwed like a *&^% da."
In the first sentence we all know that this probably means a sub par cricketing performance by the Bangalore team (or maybe that they ended up with Rahul Dravid yet again at the auction). In the second sentence the presence of really is not to indicate that the description is not a metaphor but a report of physical occurrence but merely to add emphasis to a metaphor.
Please note how the import of the statement does not change when you say "Maccha Royal Challengers got reaaaallly screwed like a *^&%$. Like actually. Proper *&#ked"
Now, though "literally" can be used to indicate actual physical occurrence. In context it can mean mere emphasis to a figure of speech/phrase.