So the three actually existing people on the left (above) are people insofar as they are like the not-actually existing (but also not "imaginary") ideal person on the right. It might help to think of Brad Pitt and Angelina Jolie as the ideal forms of man and woman, and the rest of us as falling short of that (tho' of course they also fall short of the REAL ideal).
Now read the following excerpt from the Parmenides dialogue:
So... Parmenides wants to show Socrates that there are no forms (because that would indicate a division of the One: the forms being "one thing" and the actual existants "another thing"). He makes a sweet move known as the "Third Man Argument." That's where Parmenides says that if the actual existing people on the left partake in the ideal form on the right by being "like" the ideal form, then there is a likeness between them. Consequently, there must be an imaginary form standing between Brad Pitt and myself... a third man (with good abs, like Brad's, say, but still a round face like mine).
While Socrates was speaking, Pythodorus thought that Parmenides and Zeno were not altogether pleased at the successive steps of the argument; but still they gave the closest attention and often looked at one another, and smiled as if in admiration of him. When he had finished, Parmenides expressed their feelings in the following words:-
Socrates, he said, I admire the bent of your mind towards philosophy; tell me now, was this your own distinction between ideas in themselves and the things which
partake of them? and do you think that there is an idea of likeness apart from the likeness which we possess, and of the one and many, and of the other things which Zeno mentioned?
And would you feel equally undecided, Socrates, about things of which the mention may provoke a smile?-I mean such things as hair, mud, dirt, or anything else which is vile and paltry; would you suppose that each of these has an idea distinct from the actual objects with which we come into contact, or not?
Certainly not, said Socrates; visible things like these are such as they appear to us, and I am afraid that there would be an absurdity in assuming any idea of them, although I sometimes get disturbed, and begin to think that there is nothing without an idea; but then again, when I have taken up this position, I run away, because I am afraid that I may fall into a bottomless pit of nonsense, and perish; and so I return to the ideas of which I was just now speaking, and occupy myself with them.
Yes, Socrates, said Parmenides; that is because you are still young.
Then, of course, the whole Socratic notion of ideal forms is effectively exploded: because if that third man exists, then there is another standing between myself and the third man, and so on to infinity... in this way (if I'm right?), Parmenides shows that "there is only this, and nothing more." That is: nothing exists that does not exist in physical form. Never has, never will.
But that's only part of the argument... next I'll try to understand how Parmenides shifts from saying that "this world" is the only world to saying that "this world" is undivided, is One.
Please stop me if I'm making assumptions I shouldn't or reading wrong or whatever. I'm out in deep water here.