New knitters often have trouble, once they learn how to knit and purl, understanding the difference in looks between knit and purl stitches on the needles. Knowing how to "read your knitting" is important because it will allow you to find mistakes in stitch patterns and know how to fix them.
The most basic thing to know when learning to read your knitting is the difference between a knit stitch and a purl stitch.
But once you throw purling into the mix, things can get a little more confusing. Now you see that the "bumps" are really purls, and that knitting and purling are two sides of the same coin -- or the same knit fabric.
So, looking at the sample of ribbing above, you'll see columns of Vs and columns of bumps. The Vs or flatter-looking parts of the fabric are knit stitches, while the bumpier sections are purls on the right side.
That "on the right side" is important, because on the back side of the knitting you knit the opposite stitch to produce the same look on the right side -- the back of a purl looks like a knit stitch and the back of a knit stitch looks like a purl stitch.
This is why patterns will sometimes tell you to "knit the knits and purl the purls" as you see them; you're not repeating the previous row but actually doing the opposite so that the two rows look the same on the front side of the knitting.
When looking at the stitches on the needles, too, you can see the difference between a knit stitch and a purl stitch: the knit stitches are plain loops while the purls have that little bump (or "pearl"?) underneath.