IMD3 refers to the intermodulation distortion from the third harmonic of a circuit. It is of particular importance in narrow band signals because its distortion is often in the signal band. This can be seen by looking at a signal that is made up of two sine waves, one at <math>f_1</math> and one at <math>f_2</math>. When you cube the sum of these sine waves you will get sine waves at various frequencies including <math>2times f_2-f_1</math> and <math>2times f_1-f_2</math>. If <math>f_1</math> and <math>f_2</math> are large but very close together then <math>2times f_2-f_1</math> and <math>2times f_1-f_2</math> will be very close to <math>f_1</math> and <math>f_2</math>.