I have attached a document that shows how to create a cascading drop-down list.
The document shows how to filter the drop down list based on State/County/City.
Basically, you will have a smartobject for each of your drop-down lists, in this case your State, County, and City.
In each of your SmO's you will have an ID field that you can link to each other, such as having a CountyID field in the City SmO.
You will then set the Parent and Child datasources for each of the drop-down lists.
Finally, you will need to set a rule when the list item is clicked to populate each of the other drop-down lists with data one after the other.
The document that is attached goes through each step in more detail.
