One of the better explanations I've heard:
Technically, having a level is the problem, as it is the only thing that will show you the "symptom" of the 3rd axis being off. The entire exercise of 3rd axis leveling is to ensure that your level is accurate at various angles.
Imagine if your pin housing angled away from the shooter at a 45 degree angle off the mounting bar, rather than the typical 90 degrees (so the left edge of the pin guard was farther away than the right edge for a right-handed shooter). If the bubble level was perfectly adjusted at horizontal (bubble dead center) and you aimed the bow uphill, the bubble would run away from the shooter (to the left for a right-handed shooter) as that side of the level would be the high point. If you aimed downhill, it would back toward the shooter (to the right for a right handed shooter) because that side of the level would be the high point. 3rd axis adjustment allows you to adjust the sight so it is dead nuts at any angle. You do this so you can still rely on your level regardless of shot angle.
On sights with levels but no 3rd axis ajustments, you would need to shim the sight where it connects to bow's riser in order to make this adjustment (make the mounting bar come off slightly right or left from the riser).
BUT In my opinion, most shooters/hunters are not consistent enough to show a dramatic difference to make 3rd axis adjustment worth their time in the field....if theyre using their bubble at all.