3 wires are better. They have what's called "remote sensing" for the voltage regulator. Easy setup with the older style alt, and external voltage regulator.
Alt wires:
"F" Field wire: Goes to "F" terminal on voltage reg.
"S" Stator wire: This is +5volt OUTPUT when alt is turning. Usually goes to choke thermostat, but can leave unhooked if you want.
"B" Batt wire: +14V OUTPUT when alt is charging, goes to your battery.
"G" Ground.
Voltage Regulator wires:
Ground through the body.
"S" Sensing wire: this is the input that the voltage regulator reads. Wherever this is hooked up, the alt will try to maintain +14V AT THAT POINT. This is what they mean by remote sensing.
"F" Field, goes to the "F" term on the alt.
"I" Ignition wire: +12v INPUT, when ignition is on. This "turns on" the regulator.
"A" Alt: goes to the "Batt" term on the alternator, this tell the voltage regulator what the alt is up to.
Super simple to hook up bro. Here's some GREAT reading when you have time:
Electrical Tech, from MAD Electric