What is it all about literary criticism?

*Literary criticism is the method used to interpret any given work of literature. The different schools of literary criticism provide us with lenses which ultimately reveal important aspects of the literary work.

Literary criticism helps us to understand what is important about the text
its structure
its context: social, economic, historical
what is written
how the text manipulates the reader

A historical approach relies heavily on the author and his world. In the historical view, it is important to understand the author and his world in order to understand his intent and to make sense of his work. In this view, the work is informed by the author's beliefs, prejudices, time, and history, and to fully understand the work, we must understand the author and his age.

An intertextual approach is concerned with comparing the work in question to other literature, to get a broader picture.

Reader-Response is concerned with how the work is viewed by the audience. In this approach, the reader creates meaning, not the author or the work.
Mimetic criticism seeks to see how well a work accords with the real world (is it accurate? correct? moral? ). 

Then, beyond the real world are approaches dealing with the spiritual and the symbolic--the images connecting people throughout time and cultures (archetypes). This is mimetic in a sense too, but the congruency looked for is not so much with the real world as with something beyond the real world--something tying in all the worlds/times/cultures inhabited by humans.
The Psychological approach is placed outside these poles because it can fit in many places, depending how it is applied: (1) Historical if diagnosing the author himself (2) Mimetic if considering if characters are acting by "real world" standards and with recognizable psychological motivations (3) Archetypal when the idea of the Jungian collective unconscious is included (4) Reader-Response when the psychology of the reader--why he sees what he sees in the text--is examined.

Likewise, Feminist, Minority, Marxist, and other such approaches may fit in: (1) Historical if the author's attitudes are being examined in relation to his times (i.e. was Shakespeare a feminist for his times, though he might not be considered so today?) (2) Mimetic--when asking how well characters accord with the real world. Does a black character act like a black person would, or is he a stereotype? Are women being portrayed accurately? Does the work show a realistic economic picture of the world?