This is the term given to describe an object that occurs on a three-axis Cartesian coordinate system.
Cartesian coordinate system is basically a way of describing the X and Y axis that we learnt about in School, except this time there is a third axis called the Z axis which represents depth of a part.
By the above definition any object that is 3D CAD needs to have these 3 coordinate systems.
The term 3D is generally used when using computer graphics but now becoming more recognised in television and computer games.
Typically 3D objects in the real world would physically have 3 Dimensions. In computer graphics the 3D objects are represented mathematically which means the software does all the hard work giving us the ability to rotate objects on our screens when using CAD or other graphics software.
Why do you need it?
Typically in design, whether that be product or engineering design, they are all done using 3D CAD.
3D CAD is quicker and more efficient that the 2D alternative method. Not only does it make the design easier to change but gives a shaded visual representation that can help visualise exactly how the final product will look like.