It is where the ball stops, ie: the total distance travelled.
The term used for the ball in the air to the point of landing is 'carry', ie: he's carried that 250 yards.
In relation to your driver, obviously you are meant to hit it further than your 3 wood, but there could be a couple of reasons why you don't. Firstly the loft of the club could be very low (eg: 7.5 degrees), these clubs are very difficult for novice players to hit. More often than not it results in the ball slicing off to the right (presuming you are right handed) at a low height. For this reason a three wood is easier to hit, builds up your confidence and consistency.
There are other reasons like your set-up, shaft of the club and things like swing speed but impossible to tell on a forum
Is your driver a different brand/model to your 3 wood just out of interest?