https://en.wikipedia.org/wiki/Third_World
Do you think the Soviets would have called the US aligned countries "First World"? ;)
The more 'correct' term for that modern/popular meaning of 3rd world is 'developing countries' (or in German "Entwicklungslaender"). But tbh, I have no idea when, how and why the transition from 'politically unaligned country' to 'underdeveloped country' happened in the modern popular opinion - the Wikipedia article has some ideas though - but tbh I would never have considered Cold Ware era Cuba or Vietnam to be "3rd world countries", and after 1990 the whole idea behind those "three worlds" has lost all meaning anyway, and especially after China had entered the chat.
Yugoslavia and Albania are more interesting cases though indeed, at least Yugoslavia tried to play both sides during the cold war, while Albania started as a very close Soviet ally but then moved towards China and then eventually ending up as completely isolationist.
Also as a clear example for a '2nd world despot' look at Romania's Ceausescu, and for examples of '1st world despots' look at Spain under Franco (easy to forget that Spain was a fascist dictatorship until the 1970s), or Chile under Pinochet.