The EDC (Educational Development Center) Center for Children and Technology (CCT) and Computers for Youth (CFY) completed a 1-year comparative study of children's use of computers in low- and middle-income homes. The study explores the digital divide as a literacy issue, rather than merely a technical one. Digital literacy is defined as a set of habits through which children use computer technology for learning, work, socializing, and fun. The study answers the following questions: What kinds of digital literacy are emerging for children in low- and middle-income households where there is access to computers and the Internet, and why? The paper summarizes comparative findings in each of the following dimensions of literacy, and examines why these patterns have emerged: troubleshooting; purposes driving children's computing in low-income households are primarily; common tools; communications literacy; and Web literacy. Nine low-income urban children and 10 middle-income suburban children participated in the study. All were in the seventh or eighth grade and had at least one Internet-connected computer in their home. As a group, they represented a range of educational achievement levels and a diversity of demographic backgrounds. An appendix presents two brief profiles of The Academy for Scholastic Excellence (ASE) and The Power through Arts and Community (PAC) School. (Contains 15 references.) (AEF)