Stage 0 : Emergent Readers
Reading Readiness/Pre-Reading (Birth to-6):
This stage is characterized by learning to recognize the alphabet, imitation reading, experimentation with letters, and learning the sounds associated with letters.

Stage 1 : Early Readers
Initial Reading or Decoding (age 6-7):
Children in this stage are beginning to utilize their knowledge of consonants and vowels to blend together simple words such as c-a-t, b-a-t, f-a-t, h-i-p, l-i-p, etc. This ability is an integral part of beginning reading and teachers/parents need to offer many opportunities for this activity. Some children need to go through this stage of sounding out words longer than others. Over time and with guidance, they will eventually move to reading whole words. Patience is important while children move from stage 1 to stage 2

Stage 2 : Fluent Readers
Confirmation, Fluency, Ungluing from Print (age 7-8):
Children consider this the "real" reading stage. They are now fairly adept in their decoding (reading) and encoding (spelling) skills and are ready to read without sounding everything out. In this stage it helps to have children reread books frequently because this allows them to concentrate on meaning and even the spelling of the words.
Source: Dr. Jeanne Chall (Harvard University) link