Critiquing the literature involves looking at the strength and weaknesses of the paper and evaluating the statements made by the author/s. It allows a researcher to interpret the current understanding of a topic and determine how it answers the research question they created.
For undergraduates, you will most often critique the literature in a way that allows you to take a position on the current knowledge of a subject.
In graduate education you use the literature critique to help you locate a gap in the literature where your studies will help broaden the understanding
Critique is the part of the literature review process where you justify why your research is needed, how other researchers have not addressed it, and/or how your research will advance the field.