Alice uses a figure of speech. Bob reiterates the usual metaphorical meaning. Alice says no, she meant it literally.
There's also a variation in which Bob questions the metaphor, and Alice responds sarcastically that she meant it literally. See also Visual Pun for when a play on words is given literal visualization. Related to Not Hyperbole, where what seems like an exaggeration isn't, and Made [...] [tvtropes.org]