How do we interpret the Bible? Literally? Allegorically? It depends on how the Author wants each section interpreted.
Hermeneutics, defined as the science of interpretation, is important in every field of endeavor (1). People working in law, philosophy and religion use hermeneutical techniques to interpret communication, whether written, oral or otherwise, but so do friends arranging a party, and even lovers proclaiming their everlasting devotion. Biblical hermeneutics applies the art and science of hermeneutics to gathering meaning in the Bible.
When a book is written and subsequently read, information and emotion are transferred from author to reader, and both have an important role in the process. Things become more complex when the reader is not the reader that the author was writing for, as is the case with the Bible. The role of the author is to assemble his ideas in a coherent fashion and then decide how best to communicate those ideas to his intended audience. He may use different languages, different genres (narrative, poetry, law, prophecy, wisdom, letters, and apocalyptic), different words, and different stories to illustrate his points (2). The author then puts pen to paper (or fingers to keyboard) to write his work.