init 3 takes you to the run level that doesn't run the x server. This is the run level you would use to run an nvidia driver installation program. It can't be run if the x server is running.
Some distros such as slackware and debian use different run level numbers. The init program is the first program that runs. It controls how it runs, and what services get loaded. Init 0 will shutdown your computer. Init 6 will reboot your computer. Take a look at the /etc/inittab file. It is the config file that controls init's behavior.
# /etc/init.d/rc takes care of runlevel handling
# runlevel 0 is System halt (Do not use this for initdefault!)
# runlevel 1 is Single user mode
# runlevel 2 is Local multiuser without remote network (e.g. NFS)
# runlevel 3 is Full multiuser with network
# runlevel 4 is Not used
# runlevel 5 is Full multiuser with network and xdm
# runlevel 6 is System reboot (Do not use this for initdefault!)
There is a pdf or html version of the Linux System Administrator's Guide (SAG) that you may be interested in reading: http://www.tldp.org