Thirteen marginal Philippine communities were examined in an ethnographic study of the meaning of functional literacy and whether literacy invariably promotes development. The 13 sites were purposely selected to provide a broad sampling from three standpoints: (1) major livelihood and form of economic activity (farming, fishing, urban poor, disaster areas); (2) ethnolinguistic grouping (Luzon, Visayas, Mindanao); and (3) lifestyle or rhythm of life in the community (traditional, transitional, Moslem Filipino minority, lowland Christian majority, urban poor, developmental). The sample functional literacy rate in the study's communities ranged from 34.4% to 79.8%. Special attention was paid to the following topics: community life as a context of literacy practice; community knowledge and the passage to a literate tradition; different practices, meanings, and definitions of functional literacy in different contents; constraints in the relationship between literacy and development; and possibilities for literacy in conceptualizing a school of the people. The study demonstrated that the concepts of literacy and numeracy cannot be separated from their social and cultural settings and that standard measures of literacy used in industrialized countries are often inappropriate in other nations. (Eleven tables/figures are included. The report contains 41 references. Appended is information about the quantitative method and data analysis.) (MN)