I will try to remember what they taught me in teacher school...

1. The first stage is letter recognition, attaching the sound to the letter.
This stage usually will end with the child knowing some "Site words" those are words they are not actually read in a phonetic way, rather they just know it though memory. (EXAMPLES: and, the, with..... sometimes store names that are advertised a lot)

2. The next stage is the sound out stage, kids discover that when the letters are put together they make different sounds. This is the emergence of true reading.

3. The last stage is Fluency, this is when a person can read in a flowing manner. This is true reading.

With DS7 He started stage 1 when he was about 15 months. I discovered he was at stage 3 at age 2.5, it may have been earlier.

He could and did read books, like Dr. Suess at 2.5. And anything else he got that had text on it. The supermarket checkout was always a lot of fun as he read the tabloid headlines and asked me questions about what they meant.
"Who is Brad? why is divorcing Jen? what does divorce meant?" Always a fun show for on lookers who would tell me my child was so smart. Meanwhile I'm just trying to get my eggs home un-cracked.

By 3 he was reading 3rd grade early reader books. By 4 he started reading 4th grade, he could read Harry potter but it was too scary for him. He read a lot of captian underpants and ricky ricotta. In kidergarten he read all sorts of stuff, and by 1st he read harry potter, it wasn't that scary anymore.