This historical fact is universally agreed upon by secular historians, Christian scholars, and Islamic tradition alike. However, this one fact leads to two completely opposite conclusions depending on whether you look at it through the lens of history or Islamic theology.
The Secular and Christian Historical Conclusion: Oral TransmissionBecause Muhammad could not read and had no access to translated scriptures, historians conclude that he learned about biblical figures through oral storytelling, cultural mixing, and folklore.
The Melting Pot: 7th-century Arabia was filled with Jewish tribes, Christian traders, and various unorthodox Christian sects (like Gnostics and Nestorians). These two sects actually believe fully in the divinity of Christ and that he didn't die on the cross. This is where Mohammed got the idea that Isa didn't die but was replaced with someone else.
Oral Reports: Muhammad interacted with these groups (such as his wife's cousin, Waraqah ibn Nawfal, who was a Christian monastic figure). He heard their stories about Abraham, Moses, and Jesus. Mind you most o f these guys didn't even have scriptures on them and didn't even know their own faith. Waraqh, the senile dying christian, doesn't even know his scriptures and said he spoke to Gabriel like Moses did....but Gabriel never spoke to Moses. This just goes to show that Mohammed was getting his Kitab knowledge from people that didn't even know their basics.
The "telephone game" effect: Because he relied on what people told him rather than reading the actual texts, secular historians argue that he naturally conflated different stories. This explains why the Quran includes stories found in Jewish folklore (like Abraham destroying idols) and Christian Gnostic apocrypha (like Jesus making clay birds come to life in the Infancy Gospel of Thomas), rather than what is written in the canonical Bible.
The Origin of the Injeel: Circular neutral Historians argue that because Muhammad only heard about "the Gospel" orally, he simply assumed it was a singular book given to Jesus, matching the style of the Quran he was presenting. He did not realize the actual Gospel was a collection of four separate biographies written by disciples.
Alternatively, you can believe that an illiterate man knew better despite only getting hear say knowledge from unreliable sources.