Here, i'll explain it to you:
At the moment, you have a normal 3ds, on which is installed a firmware (in your case, 10.3) made by nintendo; that firmware is essentially the operating system of your device, it makes everything work.
This firmware is called sysNAND, this term refers to your "vanilla" firmware.
To play free games through .cia files, you need to install a CFW (custom firmware), but since we haven't fully cracked nintendo's firmware, we're using a workaround.
The solution we employ is to install a second firmware (called emuNAND) which resides onto your microSD card.
However, this process can be done on sysNAND 9.2 or lower.
As a result, you will need to downgrade your device from 10.3 to 9.2, and then you will be able to install emuNAND on your device.
EmuNAND is installed by accessing the homebrew launcher, which is done by using an exploit (commonly browserhax).
Before installing emuNAND, it's important to make a backup of your sysNAND to recover your console in case anything goes terribly wrong (tho there's still a small risk).
So, once your console is downgraded and you accessed the homebrew launcher, you'll need to install emuNAND onto your SD, this is done automatically by launching an application through the launcher.
Once that is done, all you need to do is unliking the two NANDs, which is done by formatting either one. (tutorials explain each step in detail)
In short:
10.3 --> Downgrade --> 9.2 --> Homebrew Launcher --> Backup of sysNAND --> setting up emuNAND --> unlinking NANDs
Once that process is done, your device will have 2 options when booting up: running your sysNAND or your emuNAND.
SysNAND must stay at 9.2, you should never touch it again.
EmuNAND, however, can be updated at will.