The Register details how the technology creates 3D images:
So how does it work? Think about that 3D cinema experience: differently polarized images play on screen together. Viewers wear special glasses with lenses that allow opposite polarizations through. In a simple 3D screen, a very fine grating, called a "parallax barrier", is placed in front of the LCD screen. It does the job of the polarizing glasses, directing light from each image slightly differently so that at a so-called "sweet spot" about 20 inches in front of the screen the two images are separated just enough that the brain will create a composite 3D image.

The technology is said to create vibrant 3D images, but the screen must be viewed at a precise angle and it can take time for the eye to adjust to. Sharp's monitors offered both 2D and 3D modes, so it's likely the 3DS will as well.