She is surely burning. A napalm bomb was dropped on her village. The photo documents people fleeing. Look at her arms; you can see the skin peeling away.

Here's a photo of her back: https://i.ytimg.com/vi/KZZvVl11PvU/maxresdefault.jpg. This is the life-long damage: http://img2.timeinc.net/people/i/2015/news/151109/napalm-gir....