Digital Games have become a major recreational activity and part of the culture for so-called digital native children. Many researchers believe that digital games can be applied as an effective medium for instruction. Gee (2003) argues that e-learning has a reputation for being dull and ineffective, whereas games have developed a reputation for being fun, engaging, and immersive and capable of promoting deep thinking and complex problem solving skills. Many parents worry, however, that gaming is an activity that interferes with their children's schoolwork, social skills, and exercise (Kutner, Olson, Warner and Hertzog, 2008). The different perspective of parents towards digital games influences the potential development of game-based learning and impedes the progress of integration of digital games into school curriculum design. Eco (1979) suggests that if educators want to use games or digital media for teaching and learning, they need to equip students with the ability to understand and to use digital media. For this reason, this study aims to assess parents and children's game literacy in order to diminish their perception conflicts on digital games. First, an extensive review of literature about the notion of game literacy is conducted and the analysis, evaluation and critical reflection on digital games are presented. Based on the literature review, a questionnaire of digital game literacy was designed as an instrument for assessing parents' and children's perceptions. Five hundred and one elementary school students and their parents participated in this study as paired sample. The statistic results indicate that there were significant differences between parents and their children in the understanding of digital game literacy in fourteen out of nineteen items. The results showed that children had better understanding than their parents of the information and rating system of digital games. The results also showed that parents' primary concern is how to maximize their control over children's game playing behavior. However, as expected, children can often find a way out of it with their perspicacity of digital games. That parents have less digital game experiences and lower game playing frequencies than their children could be the cause of this situation. The finding demonstrates the necessity of digital game literacy, fills the gap in people's knowledge of the digital game culture of students, and provides a useful foundation for educational purpose. Since digital game playing has become an activity which children enjoy but their parents worry about in contemporary societies, game-based learning cannot be declared simply as approaches to the acquisition of knowledge, or the mastery of particular practices. Before incorporating digital games in education, we need to educate the public with game literacy and an understanding and acceptance of digital games for its social and cultural position. Otherwise, bringing digital games into the school may create as many problems as it solves.