Definition
This idiom is used to express that two people are enjoying each other's company and are comfortable together, but the presence of a third person would disrupt this comfortable dynamic.
They were enjoying a quiet time in the park, but when their friend joined them, the atmosphere became a bit awkward, it was like 'two's company, three's a crowd'.
When I saw John and Mary talking intimately at the cafe, I knew I'd better not join them because 'two's company, three's a crowd'.
We were originally planning to go on vacation with another couple, but they ended up canceling, which was fine by us, since 'two's company, three's a crowd'.