Why Each bit is a binary digit with two possible values, so n bits give 2^n distinct combinations. With 3 bits that is 2 x 2 x 2 = 8, counting from 000 through 111 (0 to 7 in decimal). So a 3-bit counter cycles through 8 states before rolling over.
Watch out The choice of 16 is 2^4, the count for a 4-bit counter; 6 comes from multiplying 3 by 2 instead of raising 2 to the third power.
States = 2^bits, not bits x 2. 3 bits = 8, 4 bits = 16, 8 bits = 256.