In general, one good notion of interpretation is this: A good interpretation is one that gives us a reason to—makes us, makes us want to—say what the philosopher says; one that pulls, delivers, the philosophy out of us.
The first kind of interpretation attempts to make a philosopher coherent with him- or herself, but leaves the philosopher’s thought closed up in its own private philosophical world. It typically gives us a merely ‘syntactical,’ mechanical, idea about the philosopher’s views, but no sense of reality, and no reason to care. The second kind of interpretation makes what the philosopher says responsible for something independently of the philosopher’s views, something being responsible for we can find independently valuable, something that we can come to want to find a way of being responsible for, something that can live for us.
Would this notion of interpretation also work for literary works?
Importantly, this is also true regarding our conception of philosophy. It is not so useful to say: “Wittgenstein thought that it is impossible to debate theses in philosophy (Investigations §128), therefore this and that.” It is far more useful if one manages to say: “this and that, and this shows that it is impossible to debate theses in philosophy.” That is, what philosophy delivers out of us is always also an experienced appreciation what philosophizing is.