First, note that the surface of the liquid is curved. This is called the meniscus. This phenomenon is caused by the fact that water molecules are more attracted to glass than to each other (adhesive forces are stronger than cohesive forces). When we read the volume, we read it at the BOTTOM of the meniscus.
The smallest division of this graduated cylinder is 1 mL. Therefore, our reading error will be 0.1 mL or 1/10 of the smallest division. An appropriate reading of the volume is 36.5 0.1 mL. An equally precise value would be 36.6 mL or 36.4 mL.
How many significant figures does our answer have? 3! The "3" and the "6" we know for sure and the "5" we had to estimate a little.
