the input size
When we say an algorithm runs in time O(n^2), the n is doing a lot of quiet work, and it pays to ask: n what? The input size is the number we measure the cost against. Think of it as the size of the box the problem arrives in: a longer string, a bigger list, a graph with more roads. The honest convention is to count the number of symbols it takes to write the input down on the machine's tape, so n is the length of the encoded input, not some informal notion of how complicated the problem feels.
Choosing the right n is part of stating the problem. For a sorting task n is usually the number of items in the list. For a graph problem we often use n for the number of vertices and m for the number of edges, and report time like O(n + m). For a single number like 'is N prime?' the subtlety bites: N itself can be astronomically large, but you write it in only about log N binary digits, so the input size is roughly log N, not N. An algorithm that takes N steps on an input of size n = log N is actually exponential in n, because N = 2^n. Getting this right is why a careful course always says 'time as a function of the size of the input'.
This is exactly why the next idea, a reasonable encoding, matters: how you write the input down decides what n is, and a sneaky encoding can make a slow algorithm look fast or a fast one look slow. Fix a sensible way to write inputs first; then the question 'how does the running time grow with n?' has a clean, model-independent answer.
For the number 1000, the input size as a binary string '1111101000' is 10 bits, so n is about 10, not 1000. A loop that runs 1000 times on this input does 2^n iterations relative to n = 10 (since 2^10 = 1024), so it is exponential in the size, even though it sounds like a small loop.
A single number of value N has input size about log N, so 'number of steps = N' is exponential in the size.
Input size is the LENGTH of the written-down input, not its numeric value: a number N has size about log N, which is why 'pseudo-polynomial' algorithms (polynomial in N but exponential in the size) are not truly efficient.