An eigenvalue of a matrix does not necessarily appear in a matrix at all- and although 0 appeared twice in the original matrix here, it had algebraic multiplicity one.
It is always possible to write a matrix in diagonal form, with the eigenvalues on the main diagonal or in "Jordan Normal form" which has 1s just above main diagonal and eigenvalues on the main diagonal. In those, each eigenvaue will appear on the main diagonal a number of times equal to its algebraic multiplicity. That is what micromass thought you were talking about.
In this case the characteristic polynomial is (if I have done the calculations correctly) lambda^2(1- lambda). 1 and 0 are eigenvalues. 1 has algebraic multiplicity 1 and 0 has algebraic multiplicity 2. (Since the characteristic polynomial of an n by n matrix has degree n and can be factored into n linear factors (over the complex numbers) the algebraic multiplicities add to n.)
It is easy to show that if <x, y, z> is an eigenvector with eigenvalue 1, then x- y+ z= x, x- y+ z= y, and x- y+ z= z. Those reduce to -y+ z= 0, x- 2y+ z= 0, and x-y= 0. The first says z= y and the third x= y. Putting those into the middle equation, y- 2y+ y= 0 for all y. That is, we can write such an eigenvector <y, y, y>= y<1, 1, 1>. That is a 1 dimensional space- it is spanned by <1, 1, 1>- so the eigenvalue 1 has geometric multiplicity 1. Similarly, if <x, y, z> is an eigenvector with eigenvalue 0, then x- y+ z= 0 so that z= y- x. That is we can write such a vector <x, y, y- x>= <x, 0, -x>+ <0, y, y>= x<1, 0, -1>+ y<0, 1, 1>. <1, 0, 1> and <0, 1, 1> span a two dimensional space so the geometric multiplicity of the eigenvalue 0 is 2.
It is, however, possible for an eigenvalue of algebraic multiplicity higher than 1 to have geometric multiplicity less than the algebraic multiplicity. For example, the matrix [1, 0, 0; 0, 0, 1; 0, 0, 0] has characteristic polynomial (1- lambda)(lambda)^2 and so has 0 as an eigenvalue of algebraic multiplicity 2. But if <x, y, z> is an eigenvector with eigenvalue 0, then we must have x= 0, z= 0, but no condition on y. Any eigenvector corresponding to eigenvalue 0 is of the form <0, y, 0> which is a one dimensional subspace so 0 has geometric multiplicity 1, not 2.