Translation:I waited for three hours.
まち does mean town in some contexts. The hints just list the possibilities for that word regardless of context. It doesn't mean that everyone of the hints listed is appropriate for that particular Duolingo sentence. In this sentence, I could tell that まち wasn't a noun here because it was clearly part of the verb.
待 is the kanji for "to wait", as in 待つ (matsu). "to hold" is 持つ (motsu). if you pay close attention to the left side of each kanji, you will notice the kanji 持つ's radical for hand (扌). I don't know much about radicals, but the kanji for hand (手) is pretty easy to remember and so is its radical (which helps a lot in this case). Not sure if that answers your question though e.e