I use the two handed method shown in the Philosopher's Wool (PW) Fair Isle video. Merigold, is correct, the 4th stitch is to weave the unused color from right hand yarn behind the stitch made with the color from the left hand yarn.
I believe the PW Fair Isle video recommends no more than two stitches of the same yarn without weaving in the unused yarn. For sweater or socks, a float of 3 or more stitches can be a source of snags for fingers or toes when putting on the garment.
I think they use X for yarn from the left hand (LH) and O for yarn from the RH. So you would need stitch 4 if your pattern is ...
[I](charts are read from right to left)[/I]
The act of wrapping the unused yarn (pretend knit) before wrapping the yarn to be knit and then unwrapping (un-pretend knit) causes the yarns to twist or wrap before and then untwist after the stitch. This captures the unused yarn within the stitch in a way that is not visible from the RS of the work.
For another instructional source on multi color knitting you can try this PDF link.
( http://www.knitpicks.com/images/pdf/colorknitting.pdf )