Level 2 tells you 8,000 shares are bid at 10.00. Level 3 tells you they are eleven separate orders, when each arrived, and in what order they will fill — which makes queue-position directly computable rather than estimated.
In older usage the term also meant the quote-entry terminal used by registered market makers, but in modern data terms it means the order-level feed, marketed as market-by-order.
Example: two books both show 8,000 bid at 10.00. One is a single 8,000-share institutional order; the other is eleven orders averaging 730 shares, mostly from fast cancellers. A seller reading level 3 knows the second book is far more likely to evaporate when attacked.
Related: level-2, market-by-order, queue-position, direct-feed