Define $B: \Bbb{N} \times \Bbb{N} \to \Bbb{N}$ by the recursive formula:
$$B(0,x) = x+1$$ $$B(y+1,0) = B(y,1)$$ $$B(y +1,x +1) = B(y, B(y +1,x))$$
The assignment asks me to find simple formulas for $B(1,x), B(2,x) \text{ and } B(3,x)$. I think I could do this if I understood how this function actually works.
I've tried sticking in natural numbers but I don't quite follow. If $x=1$ and $y=2$,
$B(0,1) = 1+1 =2$
$B(y+1,0) = B(2+1,0) = B(3,0) = B(2,1)$
$B(y +1,x +1) = B(2 +1,1 +1) = B(3,2) = B(2, B(2 +1,1)) = B(2, B(3,1))$
What is $B(2,1)$ and $B(3,1)$? Do I even need to have values for those to understand the problem?
I think you're picturing it backwards, pluggin the values you care about into the $x$ and $y$ in the definition. That's not going to work: instead, you want to use the definition to "build up to" the values you care about.
For example, let's say we want to compute $B(2,0)$. We have: $$B(2,0)=B(1+1,0)\color{blue}{=}B(1,1)=B(0+1,0+1)\color{red}{=}B(0, B(1,0))$$ where again the red equality comes from the third clause of the definition (with $y=0,x=0$) and the blue equality comes from the second clause of the definition (with $y=1$).
So now we have a "sub-computation" to perform: we have to compute $B(1,0)$ before we can finish computing $B(2,0)$. As before we have $$B(1,0)=B(0+1,0)\color{blue}{=}B(0,1)\color{green}{=}2$$ where the blue equality comes from the second clause of the definition (with $y=0$) and the green equality comes from the first clause of the definition (with $x=1$). Note that this is new: we couldn't apply the first clause of the definition until now.
And now we're ready to finish our computation of $B(2,0)$. We already showed that $B(2,0)=B(0,B(1,0))$, so by our above sub-computation we get $$B(2,0)=B(0,2)\color{green}{=}3$$ where again the green equality comes from the first clause of the definition (with $x=2$).
Computing $B(2,1)$ takes longer, but the idea is the same. At each stage, apply one of the relevant clauses to break down your current $B$-expression into one with smaller entries. When one entry or the other is zero, you use either the first or second clause; if neither coordinate is zero, you use the third clause. The values of $x$ and $y$ you consider change with each step. It might help to rephrase the clauses in terms of subtraction, so that e.g. the third clause would be
but this is somewhat messier in the long run.