Figuratively means metaphorically, and literally describes something that actually happened. If you say that a guitar solo literally blew your head off, your head should not be attached to your body.

Most of us were taught that figuratively means something other than literal, and that literally means "actually" or "exactly." Somewhere along the line, literally began to be used as, well, figuratively, like this:

But they're also going to create literally a tidal wave of data. (Washington Post)

There wasn't an actual tidal wave, just a lot of data. Here are some examples that make word nerds literally smile:

Today, protesters literally occupy Wall Street, camping in Zuccotti Park at the heart of New York's financial district. (Washington Post)

They're really, actually there.

People can literally drown in their own body fluids. (Scientific American)

"We literally had fish blood running through the parking lot," he says. (Forbes)

Ew, but true.

Figuratively is more imaginative, it's used when you mean something didn't really happen. It's metaphorical, as in these examples with boats and feathers:

Besides, figuratively speaking, they are still in the same boat. (Mayne Reid)

So Josh—as he figuratively put it—had not a feather to fly with. (Burford Delannoy)

Although literally has been horning in on figuratively's turf, they're really not the same, in fact the two words are often go together to complete a picture:

Watching a waterfall drowns out — literally and figuratively — everyday cares. (Seattle Times)

"The Piano Lesson" tells a more haunting story, both literally and figuratively. (New York Times)

Will people understand you if you use literally when you mean figuratively? Sure. Most people will recognize that when you say, "The guitar solo literally blew my head off" it was an awesome solo, but your head is, in fact, still on your neck.