I am a student at Rice University, and currently up to my elbows in a course on Generation X through literature and society. I think the easy dismissal of this term as well as the condemnation of our generation as illiterate are unfair.
Actually, the term Generation X was not thought up by "some ad executive." The term was coined from either the Billy Idol punk band, Generation X, or the Douglas Coupland novel, also "Generation X" (which, by the way, is excellent and I recommend it highly) Accounts disagree on who actually originated the term.
The term Generation X signifies a number of traits. The Coupland novel contains a number of definitions of X-traits. Among these are "terminal wanderlust" and "poverty jet set." Also, the term does not really mean a dead end, it more signifies the indefinable characteristic of X--people couldn't figure it out, so the generation became X, the unknown.
For more Gen. X reads, check out Bret Easton Ellis's "Less than Zero," which has been compared to a "Catcher in the Rye" for the MTV generation.
On a side note--our generation's literacy has shifted. We are not illiterate in literature, but we are much more visually literate and computer literate. I personally love literature, but there are a number of other types of literacy which should not be discounted.