Optical amplification in the gain medium of a laser or laser amplifier arises from stimulated emission, where the input light induces transitions of laser-active ions from some excited state to a lower state.
In a three-level system, the laser transition ends on the ground state. The unpumped gain medium exhibits strong absorption on the laser transition. A population inversion and consequently net laser gain result only when more than half of the ions (or atoms) are pumped into the upper laser level; the threshold pump power is thus fairly high.
The population inversion can be achieved only by pumping into a higher-lying level, followed by a rapid radiative or non-radiative transfer into the upper laser level, because in this way one avoids stimulated emission caused by the pump wave. (For transitions between only two levels, simultaneous pump absorption and signal amplification can not occur.)
An example of a three-level laser medium is ruby (Cr3+:Al2O3), as used by Maiman for the first laser.
A lower threshold pump power can be achieved with a four-level laser medium, where the lower laser level is well above the ground state and is quickly depopulated e.g. by multi-phonon transitions. Ideally, no appreciable population density in the lower laser level can occur even during laser operation. In that way, reabsorption of the laser radiation is avoided (provided that there is no absorption on other transitions). This means that there is no absorption of the gain medium in the unpumped state, and the gain usually rises linearly with the absorbed pump power.
The most popular four-level solid-state gain medium is Nd:YAG. All lasers based on neodymium-doped gain media, except those operated on the ground-state transition around 0.9–0.95 μm, are four-level lasers.
Neodymium ions can also be directly pumped into the upper laser level, e.g. with pump light around 880 nm for Nd:YAG. Even though effectively only three levels are involved, the term three-level system would not be used here.