Position 1, closest to the bridge, enables the bridge pickup only.
Position 2, one step closer to the neck, enables both the bridge and the middle pickup.
Position 3 enables the middle pickup only.
Position 4 enables both the middle and the neck pickup.
Position 5, closest to the neck, enables the neck pickup only.
A three way switch only has positions 1, 3, and 5.
The position numbers are not "official" position numbers, I just used them for illustration.
John