Answer: 1010
If your teacher asked you to round to 4 sig figs, then you'd simply say 1005. But your teacher wants 3 sig figs, which means we'll have to round 1005 to some number where that last '5' is a '0'. The rule is trailing zeros, or zeros on the right, are not significant.
For example, the numbers 5700 and 5,700,000 both have the same number of sig figs. Basically they are 57 and then tack on some number of zeros.
Reading the number from left to right has us see 100 as the first three digits. The last digit is 5, which means we round the second to last digit (0) up by 1 going from 100 to 101. Then we replace the 5 with 0.
So 1005 turns into 1010. One way to think of it is to say to yourself "I need to round 1005 to the nearest ten, so I'll go to 1010". You could argue that since 5 is exactly half way between 0 and 10, you could go either direction. Convention usually dictates you round up. I like to think of shopkeepers who round up to make sure they don't lose money when it comes to rounding transaction fees.
With 1010, the first zero is significant while the second zero is not. Therefore the placement of zeros is important. As long as a zero is between two nonzero elements, then that zero is significant.
