Point of view decribes who is telling us about the plot, setting, and characters in the short story. Think about how different a story can be depending on who is telling it.
Third person is the traditional way that stories are told.
The narrator can only tell us the actions and words that he sees and hears. He cannot tell us the toughts of any of the characters unless they express them in actions or words. The terms used in Discovering Literature for discussing point of view varry a bit from these terms, but they all mean about the same thing.