This rule is one of the most common rules that the golfer needs to know. 

Out of bounds is defined by a white stake.  If you hit your golf ball out of bounds the penalty here is one stroke and distance.  Meaning that you hit lets say your first shot out of bounds, you must then add a penalty stroke and rehit from your original spot.  In this case you would be hitting your third shot off the tee.

What the majority of golfers do however, is to add the penalty stroke but then hit their third shot up where they went out of bounds with their first shot.  Therefore the golfer did not take the distance portion of the penalty into account.