Stanza 3 Summary

Get out the microscope, because we’re going through this poem line-by-line.

The Sea of Faith
Was once, too, at the full, and round earth's shore

Ooh, now we're really getting deep. Suddenly the sea grows from being just a thing you look at or listen to, to a full-blown metaphor. Here the "Sea of Faith" represents the "ocean" of religious belief in the world—all of our faith put together. Notice that Arnold capitalizes this term and puts it all by itself at the top of the stanza, so we're sure to notice that it's super-important.
There was a time, the speaker says, when that "Sea of Faith" was at high tide "full" just like the English Channel is right now.
He's really driving this whole ocean-as-metaphor thing hard.
But what's he referring to? Perhaps an earlier time, when religion was more important in people's lives?

Lay like the folds of a bright girdle furled.

When that ocean of faith was at its height, it was like a "bright girdle" (that's like a fancy belt) rolled up ("furled") around the world. See what he did there? He just used a simile to compare his already-metaphorical ocean to a beautiful belt.
This is kind of a tricky image—it's a little hard to tell how an ocean can be furled around the world, or why exactly a girdle would have folds. We think the whole idea is meant to be a little ornate and complex, because what the speaker is describing, (the high tide of the sea of faith) is so mysterious and beautiful.
For a moment, in this line, we're back in safe territory, away from human misery and grating waves.

But now I only hear
Its melancholy, long, withdrawing roar,

Sadly, in this moment, the speaker thinks the sea of faith is a long way from high tide. It's ebbing (getting lower) just like the ocean does.
The only sound he hears now is the roar of faith pulling away. We think "melancholy, long withdrawing roar" has a totally sad, desolate feeling—don't you? The world's loss of faith makes our speaker truly miserable.

Retreating, to the breath
Of the night-wind, down the vast edges drear

Here he keeps up the simile he started at the beginning of the stanza, comparing all the faith on earth to an ocean that's steadily pulling away.
Faith is "retreating" from the world. It ebbs to "the breath of the night wind." That's another great image of a powerful, rhythmic force in nature, just like the "cadence" of the pebbles in the waves in line 13.
Check out how dark the language of this poem has turned all of a sudden. There's a scary sense of size in those "vast edges" and real misery in the word "drear." We've come a long way from the calm moonlit night that started out this poem.

And naked shingles of the world.

First, we should point out that in this case "shingles" refers to the loose stones on the seashore (not something that goes on a roof).
The idea of the world being covered in "naked shingles" like a wet, desolate beach is so spine-tinglingly bleak. It's such a hopeless image. As faith pulls away, it leaves nothing behind but dreary desolation.
Well, that's uplifting.