The simplest explanation I've come across comes courtesy of 10bet: In a 3-Way Handicap, the line is set so that there can also be a draw outcome, giving you 3 potential bets. Handicap (-1): You win if your team wins the match with a goal difference of two or more.

Handicaps can also be offered in 2-way markets; this is when the teams are handicapped on the half point line, for example, 5.5. When this is done there is only two possible winners and no draws. This is a much more attractive betting opportunity to the punter. You can bet on Rugby and get a 50 deposit bonus.