It means "she speaks well". A highly educated person may say something like "She speaks with excellent diction and a vast vocabulary", but an ordinary person wouldn't use these formal sounding words. It is more natural to say something like "she speaks well". If a person wanted to mock someone who was trying to sound very educated they may say something like "she can talk pretty", because that sentence sounds deliberately uneducated and simple-minded. So they replace "speaks" with a simple word like "talk" and they replace a proper word like "well" with something that isn't quite correct, like "pretty".

Without context I think "pretty" here is most likely an adverb, although possibly a noun if allowing for some "literary license": ADVERB: She can talk in a pleasing/appealing manner. (ie "prettily", although I've never heard that word used before.) NOUN: She can talk about prettiness, what is and isn't pretty, how to be pretty, etc. (Like a writer for a glamour magazine might do.) P.S. I agree with Karl. For me this statement sounds odd and I would discourage using it unless intentionally using it for style. I would never say it. ;)