Array formulas are a powerful tool in Excel. The {1,2,3} here indicates you are referring to a horizontal array with values 1,2,3. You could have typed C2:E2 instead (with the same values in those cells).
I recognize you are working in an MS Office 365 or 2019 environment (*more below).
The problem you are posing is a multiplication of two vectors X(i), vertical and Y(j),horizontal; the resulting output is a matrix which returns the individual operation at each intersection M(i,j) = i*j.
The latest MS Office 365 (2019?) allows you to "spill" results out to the right and down of your formula cell. If I have the following data: A1=1; A2= 2; A3=3 and B1=2; B2=3; B3=4, the formula C1=A1:A3*B1:B3 will return the product of these two vertical vectors and will return a vertical vector C1=2 (1*2); C2=6 (2*3); and C3=12(3*4). Conversely, if I have the following data: A1=1; A2= 2; A3=3 and B1=2; C1=3; D1=4 (note the second array is now horizontal), the formula =A1:A3*B1:D1 will return the product of these two vectors and will return a 3x3 matrix with M(i,j) = (A1*B1, A1*C1, A3*D1, A2*B1,A2*C1,...,A3*D1)
Again "spilled" these results (output vector or matrix) are possible ONLY in Excel 365 (and 2019?).
(*) in a traditional Excel environment (2016 and earlier), a SINGLE formula result cannot be spilled over multiple cells (exceptions apply if you select multiple cells - different question). Therefore, you would only see one value returns (the first one of your output matrix or vector, in our case: "2"). The other 8 values of our 3x3 matrix are hidden (but can be seen from the evaluate or F9 key).
Also note that Excel 2016 and prior cannot return a matrix per se; it will return an array (9 arguments in our case), where V(1 to 9) = i*j. The same sequence logic applies when creating array formulas with columns and rows as above.
Note that array formulas in Excel REQUIRE you to use the CTRL-SHIFT-ENTER key to return a value, otherwise you will get a #VALUE error. You can use Array formulas in traditional Excel and in the latest version of Excel (CTRL-SHIFT-ENTER works the same in 365 as in the 2016 version). Remember, your actual result of your array formula is an array and is embedded in your cell result. The best way to use array formulas is to wrap them with standard functions like SUM(); this will return the sum of your entire array (hidden in that cell).
Sorry for the lengthy explanation, but the topic is not an easy one to describe in a few words.
Hope this helps!
