It works like a layaway plan at a department store (if they do that any more). Another party holds the deed to the property. You may your payments to the owner the agreement calls for the deed to be transferred to you in (your case) three years.
Like lease-options, lease purchases, and land contracts, you do run some risks. The primary one is that, at the end of the period, the owner doesn't transfer (or is unable to transfer) the lease to you. If, for instance, the owner fails to make payments and is foreclosed upon, you'll end up with nothing. Another concern, in today's market, is that the property might not appraise for what you'll be paying for it. Let's say you've agreed to pay $300,000 for the property in 3 years. Suppose in 3 years you apply for a loan and the appraisal comes back at $275,000. That could be a problem.
There are ways to protect yourself in both those scenarios. In the first case, you can escrow the documents. And have the owner provide you a document ("Authority to Release Information") that will enable you to monitor the status of his mortgage. Or, better, use a land trust with the trustee as owner of the property.
In the case of it not appraising for the agreed-upon price, make sure you have provisions addressing that in your contract. Possibly something allowing an extension of the contract for another year or two years if the property fails to appraise.
Make sure you have a real estate lawyer review all the documents before you sign anything.
Hope that helps.