Readability and legibility are often confused.

Readability is most often used to describe the ease with which written language is read and understood – it concerns the difficulty of the language itself, not its appearance. Factors that affect readability include sentence and word length, and the frequency of uncommon words. i.e. more about (text content).

Legibility describes how easily or comfortably a typeset text can be read. It is not connected with content or language, but rather with the size and appearance of the printed or displayed text. i.e. more about (text appearance).

A wide range of factors that affecting legibility include type size, type design (eg, comparing serif vs sans serif type, italic type vs roman type), line length, line spacing, colour contrast, the design of right-hand edge (for example, justification (straight right hand edge) vs ranged left, and whether hyphenated).

Some commonly agreed findings of legibility research include:
• text set in lower case is more legible than text set all in upper case (capitals), presumably because lower case letter structures and word shapes are more distinctive, having greater saliency with the presence of extenders (ascenders, descenders and other projecting parts);
• regular upright type (roman) is found to be more legible that italics, contrast, without dazzling brightness, has also been found to be important, with black on yellow/cream being most effective;
• positive images (eg, black on white) are easier to read than negative or reversed (eg, white on black);
• the upper portions of letters play a stonger part than the lower portions in the recognition process;
• legibility is compromised by letterspacing, word spacing and leading that are too tight or too loose. Generous vertical space separates lines of text, making it easier for the eye to distinguish one line from the next, or previous line. Poorly designed fonts and those that are too tightly or loosely fitted can also result in poor legibility.

From Wikipedia