That is a good question. I would say that it means the child has learned the basics of phonetic decoding ("cracked the code", as reading teachers like to say), which includes blending letter sounds to form words. So a beginning reader typically can read simple structures like CVC (consonant-short vowel-consonant) words, using the first (most common) sound of the letters, and may have a store of under 100 high-frequency words by sight. Most readers reach this stage somewhere between late in kindergarten and mid-way through first grade.
Progressing from single words to sentences usually doesn't take that long, as long as the words in the sentences are fully decodable or in their high-frequency sight vocabulary. The distance from sentences to whole books depends largely on the text density of the book, since many early readers only have a single sentence on each page, accompanied by many visual cues and illustrations. If you're talking about what we consider fluent/mastery readers, that usually takes until the end of third grade, for NT readers, at which point most readers can handle somewhat more substantial chapter books, and need primarily to practice, and build up vocabulary, rather than learn mechanical reading skills.
