Degrees of freedom are the different axis or degrees of movement supported by a system in either real or a virtual environment. In 3 dimensions there are 3 axis, x (horizontal), y (vertical) and z (depth). An object or entity can freely move along the axis. 3 degrees of freedom is de facto in 3 dimensional spaces. There is a concept of six degrees of freedom which is still 3 degrees of freedom but related to the movement of the head and torso separately.
