I was asked about the Hindu understanding and interpretation of scriptures, and what they mean to me. I decided that I would answer this in a post rather than as a comment reply.
There are various types of Hindu scripture, the oldest of which are the Vedas. All orthodox Hindus regard the vedas as the divine word of God. The vedas are mostly songs of praise, and so are open to a number of different interpretations. Some of these are resolved by the Upanishads, philosophical discourses on the vedas. Again these texts are regarded as sacred by all orthodox Hindus.
In addition to these universally accepted scriptures, each sect has agamas, which detail the worship of the deity or deities worshipped by that sect. These are regarded as sacred by the followers of the sect, though they see them as only applicable to sect members. The vedas and agamas are known as Shruti, meaning “that which is heard”.
There are also scriptures known as Smriti means “that which is remembered”. These include the Itihasas, the great epics of the Ramayana and the Mahabharata. Some sects may take these literally, others symbolically, and others as just moral stories which teach the concepts of Dharma.
Hindus are generally tolerant of differing beliefs of other sects, so even a sect which sees the Bhagavad Gita as literally true would see a Hindu from a different sect which interpreted it symbolically as valid, though maybe they would personally think that this was not the best way to read it. Some sects allow a wide range of beliefs within the sect, for example Dr. Sara Sastra writes on Balinese Hindu philosophy:
If you say God is different from the human being, the Balinese will accept it. And if you say God is the same as human, we accept that also. All this makes Balinese very strong.
I have only just touched on the many different types of Hindu scriptures. Much more information can be found on Wikipedia, in Chapters 26 and 27 of “Dancing with Shiva”, and in “Am I A Hindu? The Hinduism Primer” by Ed Viswanathan, and in rather less detail in his online article “What is Hinduism“.
Different understandings of the Gita
Just to illustrate the ways that different Hindus can look at a text, I will describe the way different Hindus may look at it.
A Vaishnava Hindu may see the story as a completely true historic event, where Krishna, the eighth avatar of Vishnu really was the charioteer in a war against the Kurus. Other Vaishnavas might see it as a real event, but having happened on another plane, or maybe in a previous cycle of the universe.
A Smarta Hindu might see it as a highly esoteric symbolic story. Krishna could represent a person’s spiritual elements (Atman and Paramatman), Arjuna the intellect, and the five horses the senses. The spiritual and intellect can control the senses, pulling the chariot (person) through samsara unhindered.
A Saiva Hindu might see it as a story, with a very good explanation of dharma, samsara, karma, and reincarnation. A good Saiva Hindu would respect it as a book holy to other Hindus, and understand how for some it is the key to their beliefs.
How I see the Scriptures
As a Saiva Hindu of the Kailasa Parampara of the Nandinatha Sampradaya, I see the Vedas as the first ultimate truth. Most of my understanding of the vedas comes from the Master Course Trilogy, by Satguru Sivaya Subramuniyaswami (A Satguru of the lineage), which I see as divine teachings. The Saiva Agamas and the Tamil Tirumurai and Tirukural are also divine scriptures.
Whereas I acknowledge the Gita, Mahabharata, and Ramayana as a genuine source of inspiration to many Hindus, as a worshipper of Shiva I do not see them as part of my scriptural canon. I don’t view them as historical events of this world, though I am undecided on whether they may have been real events on another plane or in a previous cycle of the universe.