
Dom V. answered 09/01/17
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Cornell Engineering grad specializing in advanced math subjects
In the bottom row of the image (formula for xk+1), the first term after the equals sign is the definition of xk+1 based on the previously defined xk (notice that all the k indices are just pushed forward by one). The next term after that is still a 3x1 vector. Each row entry is the corresponding element of xk+1 written out as a linear combination of yk, yk+1, and yk+2.
The next step pulls out the y-elements as the original xk vector, and leaves the coefficients behind as part of a 3x3 matrix.
Overall this lets you write: xk+1 = Mxk, where M is that matrix of coefficients. In the context of the problem, this is important because now all you have to do to step your x vector forward (any number of times) is multiply by the coefficient matrix a corresponding number of times (e.g. xk+4=MMMMxk)