It’s done at compile time. That’s exactly equivalent to “string1string2string3”.
Suppose you have:
string x = "string1string2string3"
string y = "string1" + "string2" + "string3"
The compiler will perform appropriate interning such that x and y refer to the same objects.
EDIT: There’s a lot of talk about StringBuilder in the answers and comments. Many developers seem to believe that string concatenation should always be done with StringBuilder. That’s an overgeneralisation – it’s worth understanding why StringBuilder is good in some situations, and not in others.