Of course a 3 year old does not need a DS, but then neither does an adult, or a teenager or anyone else. Just like we don't need Mumsnet, Wiis, televisions or any other form of entertainment. Nothing is essential.
That said, my three year old DD has got a DS, but it becomes a different scenario when they are the younger child. My youngest has to do a lot of waiting around for her eldest sister to do things - swimming lessons, ballet lessons and so on. Usually these places do not have a lot of space for a three year old to run around and let off steam, so you have to entertain them for the 40 min lesson or whatever, quietly so they do not annoy the other parents and children. I have a bag of toys - colouring in, sticker books and so on to entertain her. And in that bag is a DS. I find it a useful tool for entertaining a child when they cannot run around and make noise. Believe me, if you have to do this on a regular basis you too would probably see it as a godsend. I also allow the DDs to play them on long journeys in the car, or usually any situation where they are required to sit quietly for a long period of time.
However, they do not generally play with them in the house at home. Not because they are banned, but because they are in their activities bags and so usually, they don't think to get them out. As such, they can be very useful and I'd have to ask what is the harm in that? Furthermore, my DD has got simple counting games and letter recognition games on her DS, and so they can be educational too.
However, I do not think it is appropriate for any child to take them into nursery. Not because of peer pressure (if you want to say no, that's your responsibility nothing to do with me - just like it is my responsibility to tell my children they're not to eat sweets even though their friends are). No, I think they are inappropriate in nurseries because they are expensive and really need an adult to oversee them and make sure they are used properly. As the parent, I accept that job with my DDS and their Nintendos, but I don't hink it is fair to put that level of responsibility onto someone else. Children should only be allowed to take them off when they are able to take full responsibility for them themselves. That's why I wouldn't let my 6 year old daughter take hers off anywhere either.