well for example you link from one of your sites to another persons site, then they link back to your site from an entirely different site of theres. say you own site A and the person you link to owns sites B and C, you link to site B from your site A, then this person links back to your site A from site C. Hope that helps.
its something like that you get the link for your main website from one good web site and in the reward you put its link in some other site apart from your main website
3 way linking are considered as a triangular one way link between three sites. They way it works is that you give Website A link to Website B. Website B gives a link to Website C. Website C then gives a link to Website A. In the end, C websites have links to each other, and yet none of them are reciprocal. By doing a three way link from sites hosted on different servers a webmaster can build link popularity without the search engine being able to detect the link trading as easily.
Google can detect 3 way links about as easily as they can detect reciprocal links... I'm no brain surgeon but could look at a link or citation graph programatically and easily detect them. The key I guess is detecting whether they occurred naturally or as a result of a linking scheme. Since Google is a registrar and has access to all WHOIS type info, they have other signals they can look at to determine if they are a linking scheme - things like who registered the domains, which IP addresses are they hosted on, etc. And yes... they can see past private registrations.