4E NPC design allows you to not worry about having to gear out your NPCs - their attack and defense numbers doesn't rely on items.
But this means you can't just add +3 when you do give your Orc Chieftain a +3 Axe. To make the Orc not rely on items, it has already got a bonus to its stat consistent with average items for its level. Let's say this bonus is +2.
Thus, if you added the +3 for the Axe, you would really end up with a bonus of +5 (because of the underlying built-in +2 bonus), which is too much - it would make magic items too valuable for NPCs (essentially doubling the enhancement bonus).
You only want to add the part of the +3 that's not already added in.
Which, of course, is 3-2=1. So when you give the Orc the +3 Axe, you add +1 to attacks and damage.
Note that this number, 2, is the threshold number. I hope you now see why the DMG instructs you to deduct the threshhold number for the monster's level from any gear you hand out to NPCs.
PS. If you were to give the same +3 axe to a low-level town villager, that NPC is constructed with no magic bonus at all. Hence, the threshold number is 0. Hence, the axe would grant all of its +3 to attacks and damage for this NPC.
And finally, player characters. Like that villager, a PC (of any level) is built with no assumption of a magic item threshold. This is why when the party kills the Orcs, they get to add the full +3 to their own attack and damage stats!
Not as difficult as it might seem, I trust?!