A CNC Router is (typically) a 3 axis machine.

Y Axis – front to back motion

X Axis – Side to side (left/right) motion

Z Axis – Up and down motion.

2.5D milling refers to the CNC’s ability to move the cutter along X and Y in a synchronized manner with the Z axis moving only a predetermined about during each pass.  As an example, if you were cutting a square that was 2″ x 2″ all the way through 1/2″ material and you want a hole in the center of the square that is .75″ in diameter but you only want it to go down .25″, the machine will move X and Y to form the circle and Z will lower after each pass depending on the depth per pass setting in your software.  So if you have depth per pass set to .125″, then the first pass will make the circle with the Z lowered .125″ so the circle will be .125″ deep after the first pass, then it will lower another .125″ for the second and final pass. When it is done you will have a circle that is “pocketed” .25″ deep into the material.

When the perimeter of the square is cut out, X and Y will move around the square, again with Z lowering .125″ per pass until it reaches the .5″ material thickness.

When 2.5D milling, all depths that you cut will be flat bottomed with 90 degree sides.  So the bit will only plunge straight into the workpiece.

Most CAM programs support 2.5D milling.  Vectric Cut 2D and V Carve do a great job.

3D milling refers to the CNC’s ability to move X, Y and Z all at the same time in a synchronized fashion to create contoured bottoms, sides and tops of objects.  Many times this will be called 3D carving of material.  Depending on the shape that you are carving, you will most likely be using a ball nose end mill to provide smooth contoured surfaces.

Vectric Cut 3D and V Carve support 3D milling/carving operations