IIRC correctly it means the LCD Panel is not receiving a video signal. LED# 3, I believe means the video card is communicating with the Logic Board. Most likely the LCD Panel is bad (or the cable/connectors if you had disconnected them previously for a repair or upgrade since they are easily damaged). Cannot 100% eliminate the video card though.
For reference (there are other references online and perhaps even a service guide can be found, but the moderators will not allow us to link directly to most of those sites):
https://logi.wiki/index.php/iMac_Logic_Board_LED_Indicators
Also, for completeness I see you already had another thread open discussing the issues with this same iMac where you were already advised that this iMac is not worth fixing (you should have first asked about the diagnostic LEDs there & waited for a response....I tried to reply earlier, but your first diag LED post was removed):
iMac 2011 21,5 white screen. No keys comb… - Apple Community
You definitely have some sort of hardware issue if the diagnostic LEDs are not all lit. First I would carefully inspect the cables & connectors for video cable(s), and on the Logic Board to see if they show any signs of damage, plus making sure they are fully seated. If reseating cables does not help and there is no obvious signs of damage, then there is no way to know for sure which part is bad without trying a known good part.