Learn German: Es ist drei Uhr. - It is three o'clock.

Yes, Uhr literally means "clock" or "watch". However, when telling time in German, it functions exactly like "o'clock" in English. So drei Uhr translates directly to "three o'clock".

Can I just say Es ist drei, like we say "It's three" in English?

Yes, you can! Just like in English, in casual conversation you can drop the word Uhr if the context is clear. Es ist drei is perfectly natural to say.

How do I know if drei Uhr means 3:00 AM or 3:00 PM?

German doesn't use AM or PM. In everyday spoken German, people usually rely on context—if you're meeting for afternoon cake, drei Uhr obviously means 3:00 PM. To be extra specific, you can add words like nachmittags (in the afternoon) or nachts (at night). For official things like train schedules, Germans use the 24-hour clock, so 3:00 PM would be fünfzehn Uhr.

Why is Uhr capitalized in this sentence?

In German, every single noun (a word for a person, place, thing, or idea) is always capitalized. Since Uhr (clock) is a noun, it must start with a capital letter, even when it is used to mean "o'clock".