It asked how many possible choices are there, 000 through 999 is 1000 choices, just as there are 10 numbers between 0 and 9 inclusive. (Yes, the Q also said each digit must be unique, hence the real answer is 720).

Anyway - IMO this is a terrible question.

They're saying that 1000 was also a choice on the multiple choice test

Where does it say it has to be 4 digits long? Most PINs are I guess, but you could have 3 digit pins just as easily.

He's saying there are 1000 possible PINs (000-999) if you don't have the unique digit constraint.