Think of x, y, and z as length, width, & height. The "d" thing just means "a change in" (like "a change in x"). Now imagine a 3D grid. That grid has length (x), width (y), and height (z). Now imagine you're at one point in the grid and jcsd is at another. If you draw a line between you and jcsd, you can describe the distance of that line as a difference in your x, y, and z coordinates.
If jcsd is 10 ft away from you at the same ground level, then dx is 10 ft. And your distance is 10 ft.
[tex]ds^2 = 10^2 + 0 + 0[/tex]
If jcsd is 10 ft away from you sitting on top of a 10 ft tall basketball net, then he's 14 ft away from you (imagine the slanted part of the triangle if you draw the horizontal, vertical, and connecting lines between you and him).
[tex]ds^2 = 10^2 + 0 + 10^2[/tex]
Then once you start inserting the effects of Relativity, things get screwy and you need that additional factor in the equation that jcsd mentioned.