It is based on many factors but the main factor is how many back links and the quality of those back links. Google gives each site page a page rank based on factors related to this. The max is PR10 and the better the links the higher your PR. A PR 3 is decent but most people are looking for PR5 plus. Keep building good links and yours will increase. And no it does mean you have three links.
It means nothing PR is just a number (kind of a rating system but with olmost 0 importance) Concentrate on building backlinks/rankings and traffic
Think of it this way: I'm sure that at some point, you've asked a friend to rate something between 1 and 10, with 1 being horrible and 10 being awesome, right? Well, PR is pretty much the same thing.
it means what ever you have done to your site so far you will need to double it to reach pr4 then double it again for 5 and so forth until your either out of budjet or lost your mind