Fair enough, I was wrong. I still find it very unusual that it would require 26*26*26.
Anyway, to answer your actual questions:
Let's just focus on the 2-letter code.
We have 26 choices for the first letter. A, B, C, D, E ...
We have 26 choices for the second letter. A, B, C, D, E ...
Imagine drawing (or perhaps you might want to actually do this) a 26x26 grid on a piece of paper.
To the left of the grid, write the letters from top to bottom, with one letter for each row.
On top of the grid, write the letters from left to right, with one letter for each column.
Create codes in each of the cells in the grid. The first letter will come from the letters along the lefthand side of the grid. The second letter will come from the letters along the top of the grid.
Now, this grid has 676 cells, representing each of the 2-letter codes.
Only one of these cells is AA.
There is a whole row of A_ codes, like AB AC AD, etc.
There is a whole column of _A codes, like BA CA DA, etc.
But there is only one code at the intersection of A and A: AA.
On a smaller scale, if you do this with three letters:
AA AB AC
BA BB BC
CA CB CC
3*3 = 9 codes, none of which are repeats.
When you expand to three letters, the situation is pretty much the same. There is only ONE way to get AAA, which is to select A for each of the three letters. There is no double or triple counting of AAA, because there is only one SET of actions that creates that code. Specifically: choosing A for the first spot, choosing A for the second spot, and choosing A for the third spot.
Let me know if this explanation is any better. Definitely do let me know if this isn't convincing.
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