HDCP is copy protection. When you plug in an HDMI cable to your TV, the receiver and TV 'talk' to each other (this is called handshaking). Part of the handshaking process determines if your TV supports copy protection. If your TV does not support copy protection, then the receiver is not allowed to send an HD signal over the HDMI cable to your TV.
Most modern TVs support HDCP copy protection, but sometimes there is incompatibility between the receiver and the TV. As others have said, many times the problem can be fixed by using a different HDMI cable, or by unplugging and replugging the HDMI cable. If it is working correctly with input 3 on your TV then you can just leave it that way.