The three-way system: овај / тај / онај

Овај points to something physically close to the speaker: Овај сто је нов. (This table [right here] is new.) Онај points to something far from both speaker and listener, often literally out of reach or across the room: Онај сто тамо је стар. (That table over there is old.)

Тај is the genuine middle term: something close to the person you're talking to, rather than to you - Та књига коју држиш је моја. (That book you're holding is mine.) In everyday speech тај also does double duty as the default, neutral "that" whenever distance from speaker and listener isn't really the point.

Agreement: gender and number

All three demonstratives decline exactly alike, and exactly like adjectives (see the tables below). Овај сто (masc.), ова књига (fem.), ово село (neut.) all point to the same physical closeness - only the ending changes.

Neutral ово/то/оно as predicative subjects

When a demonstrative introduces or identifies something - "this is…", "that is…" - Serbian defaults to the neuter singular ово/то/оно regardless of the gender of whatever follows: Ово је Марко. (This is Marko.), То је моја сестра. (That's my sister - feminine сестра, yet то stays neuter), Оно је наше село. (That over there is our village.) This is different from the attributive use in the previous section, where the demonstrative must agree with the noun it modifies.