Try measuring the diameter of something circular. If it's small and you have a micrometer you may be able to get as accurate as a 100th of an inch. Let's say the diameter is .87 inches. Now multiply by pi to get the circumference, which would give us 2.73318561. But we only have accuracy to the 100ths of an inch, so the best we can say is that the circumference is 2.73 inches.
Just a nitpick, but since you have only two significant numbers in 0.87, you can only say the circumference is 2.7 inches.
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