Most golfers use hybrids to take the place of long irons (usually the 3, 4, and sometimes, the 5-iron). The shape of hybrids makes them easier to hit than their iron counterpart--usually, golfers find that hybrids offer more forgiveness on mishits (and bad swings), and hybrids will also get the ball in the air quicker, and therefore stop quicker (important when trying to land on the green).
Be careful though, as there is no industry-standard when it comes to clubs. What I mean, is that a 3-iron made by Callaway won't necessarily have the same loft as a 3-iron from TaylorMade, so you may not like the results of just replacing a 3-iron with a 3-hybrid. You need to check your irons to find out what loft it is (easy to find clubs and their lofts online), and get a hybrid with that same loft.
And yes, you may still want to carry a 3-wood. A 3-wood has a loft somewhere in the range of 14-16 degrees....a 3-iron's loft is more in the range of 19-21 degrees....very different clubs.
There's tons more explanation needed, but in a nutshell, don't worry so much about what number a club is....the main thing you need to know is that a club with less loft (lower number) will make the ball go farther, and a club with more loft will make a ball go shorter and higher.