You are supposed to increase at each end of the 3rd row and then start counting again and increase on the 4th row the next time and every time after that until you have 103 stitches.
So you count from where it says "starting with a knit row, count that row as 1. The purl row will be 2 and then on the next row, which is row 3, inc at each end. Then the next is a purl and it is row 1, knit is row 2, purl is row 3 and row 4 will be the increase row. It will be another knit row.