Since repeats are allowed, we can choose any of the 5 numbers for the 1st slot, any of the 5 numbers for the 2nd slot, and any of the 5 numbers for the 3rd slot.
There should be 5 x 5 x 5 = 5^3 = 125 possible three digit numbers.
I am unsure why he explained the scenarios like that. I would have to see which video you were watching to have more context.