Levenshtein algorithm

hi,i just came across the string distance algorithm.
I took a paper and a pen to work out the exact algorithm.The answer seems to be correct.
But i could not understand why it is like that.
to fill d[i][j]
we look left,top,left diagonal.
(i guess this is where we check whether to insert,replace or delete)
But i am not sure how it is and why it is.
Can someone explain me why d's are checked for all three conditions .
I went throught this algo in wiki andhttp://www.merriampark.com/ld.htm

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