The measurement refers to the diameter of the spinning magnetic media associated with the storage device. In the old days, this is how the terms "5 1/4 floppy" and "3 1/2 floppy" were used, because the actual floppy disk inside was 5 1/4" or 3 1/2" in diameter.
Modern desktop hard drives (like your WD5000AAKS) still have spinning platters inside them that are 3.5" in diameter, hence it's called a 3.5" drive even though the external dimensions of the unit are bigger than that.
Today, a 5.25" device is a CD-ROM or DVD-ROM drive, since the CD/DVD media is 5.25" in diameter.
So, you need an external enclosure for a 3.5" hard drive where the internal interface to the hard drive is SATA. The external interface from the unit to the computer will be USB, 1394, or eSATA. (And those are in order from slowest to fastest).