After using this phrase, much to the delight of my friends and embarrassment to me, I realized 2 things:
1.) Nobody uses that phrase anymore; and
2.) I don't actually know the meaning of the term.
THEREFORE, we have a phrase of the day.
Three Sheets to the Wind
Our colleagues at CANOE, the Committee to Ascribe a Nautical Origin to Everything, have been hard at work and, to their great pleasure, they can add this phrase to their list. 'Three sheets to the wind' is indeed a seafaring expression.
To understand this phrase we need to enter the arcane world of nautical terminology. Sailors' language is, unsurprisingly, all at sea and many supposed derivations have to go by the board. Don't be taken aback to hear that sheets aren't sails, as landlubbers might expect, but ropes (or occasionally, chains). These are fixed to the lower corners of sails, to hold them in place. If three sheets are loose and blowing about in the wind then the sails will flap and the boat will lurch about like a drunken sailor.
The phrase is these days more often given as 'three sheets to the wind', rather than the original 'three sheets in the wind'. The earliest printed citation that I can find is in Pierce Egan's Real Life in London, 1821:
Sailors at that time had a sliding scale of drunkenness; three sheets was the falling over stage; tipsy was just 'one sheet in the wind', or 'a sheet in the wind's eye'.
"Old Wax and Bristles is about three sheets in the wind."
There you have it folks!
Definition from phrases.org