Step 1: Concept
The dimension of a subspace is the number of free variables or basis vectors needed to represent any element in that space.
Step 2: Meaning
Any matrix in $W$ can be written as:
$x\left(\begin{matrix}1& 0
0& 0\end{matrix}\right) + y\left(\begin{matrix}0& 1
0& 0\end{matrix}\right) + z\left(\begin{matrix}0& 0
1& 0\end{matrix}\right)$.
Step 3: Analysis
There are three independent parameters ($x, y, z$) that define the set, and the three matrices shown above form a basis for $W$.
Step 4: Conclusion
Since there are three vectors in the basis, the dimension is 3.
Final Answer: (C)