The definition of reading is: "to gain meaning from text" which means that recognising a MacDonald's sign and understanding that that is a place you can go to to eat hamburgers would be reading even if the child had no knowledge of letters whatsoever.
It also means that a child could decode the entire Declaration of Independence and sound fluent while "reading" it but get no meaning from it whatsoever and therefor NOT be reading.
My daughter knew a good many sight words well before her second birthday, could read sentences with sight words by 2.5 years old and was decoding cvc words before 3. However she only began reading beginner readers at around 3 years of age and now at 4.5 she is able to read almost any picture book and knows almost every phonics rule. (she doesn't like book without pictures yet though she will listen to me read them and she does not have the stamina for chapter books yet) I don't know what I would say if someone asked me when she started reading - I'd probably ask them what they meant first.
