Physical literacy is a term used widely in youth sport and physical education. It describes more than skill: it is the combination of things that make people likely to stay active for life.
Common definitions include:
Motivation: wanting to be active
Confidence: believing you can take part and improve
Physical competence: having the movement skills to do so
Knowledge and understanding: knowing why activity matters and how to do it
A child who is skilful but hates sport, or keen but lacking basic skills, is missing part of the picture.
A useful lens for coaches: after each session, ask whether children left wanting to come back, feeling a bit more capable, and understanding something new. Those are the parts of physical literacy a single session can influence.
Winning the game at the end is not one of them, although children usually enjoy it.