Artificial Intelligence (AI) is transforming education, workforce development, and daily life, necessitating a comprehensive understanding of AI literacy. This study explores the dimensions of AI literacy, its integration into educational and professional settings, and the challenges associated with its implementation. Using a systematic review and qualitative synthesis, this study examines research published between 2019 and 2024, identifying six key dimensions of AI literacy: technical literacy, ethical and societal awareness, critical AI literacy, AI in everyday life, human-AI collaboration, and AI pedagogical literacy. Findings indicate that AI literacy is increasingly embedded in K-12 education, higher education, and workforce training, though disparities in accessibility, ethical concerns, and inconsistent policies persist. Key challenges include the digital divide, lack of teacher training, and lack of standardized AI literacy assessment tools. Opportunities lie in interdisciplinary learning, project-based education, and AI-driven adaptive learning environments. This study makes several unique contributions, including a comprehensive framework for AI literacy, integration of AI literacy across education and workforce domains, identification of policy gaps, and a call for standardized AI literacy assessment tools. It also emphasizes the need for ethical AI engagement and responsible AI education. Policymakers and educators should prioritize integrating AI literacy into curricula, professional development for teachers, and establishing regulatory frameworks to ensure equitable AI education. Future research should focus on longitudinal studies, cross-cultural AI literacy comparisons, and developing adaptive AI learning models to enhance AI education globally.