Third-person stories are told from the perspective of someone who is not part of the story; hence, all of the characters are referred to as "he," "she," or "it," rather than "I" or "we." In third-person limited perspective, your goal should generally be to not draw attention to the narrator—in a way, you're pretending that there isn't a narrator, that the audience is simply riding in a character's head and seeing what the character sees and thinks. Take a look at these examples from the first and second chapters of Game of Thrones by George R.R. Martin:
It was not until they were mounted and on their way that Bran allowed himself to taste the sweet air of victory. By then, his pup was snuggled inside his leathers, warm against him, safe for the long ride home. Bran was wondering what to name him.
Halfway across the bridge, Jon pulled up suddenly.
"What is it, Jon?" their lord father asked.
"Can't you hear it?"
Bran could hear the wind in the trees, the clatter of their hooves on the ironwood planks, the whimpering of his hungry pup, but Jon was listening to something else.
"There," Jon said. He swung his horse around and galloped back across the bridge. They watched him dismount where the direwolf lay dead in the snow, watched him kneel. A moment later he was riding back to them, smiling.
"He must have crawled away from the others," Jon said.
"Or been driven away," their father said, looking at the sixth pup. His fur was white, where the rest of the litter was grey. His eyes were as red as the blood of the ragged man who had died that morning. Bran thought it curious that this pup alone would have opened his eyes while the others were still blind.
"An albino," Theon Greyjoy said with wry amusement. "This one will die even faster than the others."
Jon Snow gave his father's ward a long, chilling look. "I think not, Greyjoy," he said. "This one belongs to me."
Catelyn had never liked this godswood.
She had been born a Tully, at Riverrun far to the south, on the Red Fork of the Trident. The godswood there was a garden, bright and airy, where tall redwoods spread dappled shadows across tinkling streams, birds sang from hidden nests, and the air was spicy with the scent of flowers.
In this example, there is no narrator to speak of—we don't know who is telling the story, because the narrator isn't a character. Instead, the narrator follows the thoughts and experiences of some perspective characters: Bran Stark in the first chapter and Catelyn Stark in the second. Even though Bran and Catelyn aren't personally telling the story, as they would be in a first-person narrative, we still see the world through their eyes. This is what limited perspective means—our view as an audience is limited to that of one character at a time. When the author wants to switch perspective characters, he begins a new section or chapter.
Advantages of Third-Person Limited Perspective
Reliable narrator: Because the narrative is not relayed by one of the characters, third-person stories tend to seem more trustworthy and objective. The audience feels like they're inside a character's head without a narrator, so what they are shown is probably true.
Character sympathy: While not usually quite as intimate as a first-person narrative, third-person limited stories can still feel very close to the characters—the story takes place in their heads, after all.
Multiple perspectives: As demonstrated by the example passage, third-person limited narrative makes it very easy to switch from one perspective character to another. Some books have two or three perspective characters, while others—like Game of Thrones—have dozens and dozens.
Eloquence: Not all characters are as intelligent or well-spoken as others. If you wanted to write a first-person story from the perspective of a thick-headed thug, it would be difficult to describe the action as well as you would like with the thug's limited vocabulary. In third person, however, you can write a scene from the thug's perspective without sacrificing eloquence or creativity.
Disadvantages of Third-Person Limited
Easy to over-do: Just because you can write from multiple perspectives does not mean that you can do so well. Many new authors attempt to branch their story out among too many perspective characters, resulting in a slow and confusing story that loses track of its own plot. Yes, George R.R. Martin did it—but you're not George R.R. Martin. (Unless you are, of course. Hi George! Thanks for stopping by.) Try to keep your novel to two or three perspectives until you've really got the hang of juggling all those characters.
Difficult to withhold information from the reader: Since the narrator is so reliable in third-person limited, and since the audience is inside the heads of various characters, the audience will often feel cheated if you don't tell them information that the main character should have known.
Perspective errors: It is very easy to make perspective errors when writing a third-person limited story; in fact, this perspective probably sees more mistakes than any other perspective. We'll cover the many errors that writers make in third-person limited in future updates.