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“Legibility” is based on the ease with which one letter can be told from the other. “Readability” is the ease with which the eye can absorb the message and move along the line.
—from ‘Types of Typefaces,’ by J. Ben Lieberman, 1967
Whether this distinction reflects an underlying difference in reality is controversial.
Display v. Text
Research about Legibility
Reading Research: What is needed?
Know any good legibility tests for typefaces?
Legibility vs. Comfort
Legibility/Aesthetics - Improving the Reader Experience.