Consider an ALU having 4 arithmetic operations and 4 logical operation.
To identify any one of these four logical operations or four arithmetic operations, two control lines are needed. Also to identify the any one of these two groups- arithmetic or logical, another control line is needed. So, with the help of three control lines, any one of these eight operations can be identified.
Consider an ALU is having four arithmetic operations. Addition, subtraction, multiplication and division. Also consider that the ALU is having four logical operations: OR, AND, NOT & EX-OR.