From the back of the book:
The Award-Winning Fantasy Role-Playing System
The most powerful and comprehensive fantasy role-playing system is now even easier and more fun in the thoroughly revised third edition. New Colleges of Magic (including Shaping and Rune Magics) have replaced outdated material and the unique experience point system has been carefully enhanced to make your characters capable of dynamic growth. Now presented in this one volume, the DRAGONQUEST system in once more available role-players everywhere. You actually need nothing more than this book and two decimal dice to play complete and enjoyable.
TSR bought SPI (original produces of DQ) and the DragonQuest line fell by the wayside. DragonQuest Third Edition, appears to have been a thinly supported effort to bring DragonQuest back. (There appear to be no official 3rd Edition supplements.)
The addition of the Shaping Magics allowed for the creation of magic items, something very much lacking in the original system.
3rd Edition radically altered the skill/rank system that was a core mechanic of previous. While this does streamline the game, it fundamentally alters the experience of playing.