A. The scholars of Ahl al-Sunna have explained Ummi as referring to the fact that the Prophet, blessings and Peace upon him is directly taught by Allah, not by books or scholars of religion. There are many other meanings, but this seems to be the most comprehensive. In this sense all Prophets are Ummi. The restricted sense means: one who neither reads nor counts, as the Prophet, blessings and Peace upon him said: "We are ummis, we neither read nor count."
Another sense refers to "one not following the Laws of the Torah and the Injil" and refers primarily to those in his time who were following neither the Jews nor the Christians.
Another sense is in opposition to Kitabi [= of the Book] and refers to all Muslims.
In fiqh it refers to one who mispronounces Arabic. Imam Nawawi said in Minhaj al-Talibin: "The learned is not to pray behind the Ummi. The Ummi is the one who omits pronouncing certain letters of theFatiha, such as a shadda."
Perhaps "unlettered" is better than "illiterate" because the latter is negative in the English language, whereas the former is not necessarily negative.
Mawlana Jalal al-Din Rumi -- may Allah raise his rank -- wrote in his masterpiece, Mathnavi: How could the one who wrote over the moon when he cut it in two, be illiterate?