It's not a temperature controlled iron, so it doesn't really correspond to a set temperature. Basically, the knob just sets the power level... so 1 will probably be too cold to do useful soldering, and 5 is probably going to lift traces.
So, I'd put it somewhere in the middle, and maybe turn it up a bit if it's not melting the solder well, or when using it on bigger pins.
Though really, I'd recommend a temperature controlled iron... a temperature controlled iron has a sensor that measures the actual tip temperature and applies more or less power to the iron to keep it at a steady temperature. As you can imagine, when the iron is sitting idle, it doesn't need much power to stay at 700 degrees, but when touching a big pin with a bunch of solder, it needs a lot more power to stay hot.
With your iron, if you set it to 3, it could be over 800 degrees when sitting idle, and then drop below 700 degrees when you touch a pin.
DogP