When pure iron (without carbon) is heated, the ferrite transforms into austenite at 910 °C. This can be seen by looking at the vertical axis in the diagram.
In steel containing 0,80 % carbon, i.e. a eutectoid steel, the transformation to austenit takes place at 723 °C. The temperature, 723 °C, at which ferrite and pearlite starts to transform into austenit is called A1.
Steel with less carbon starts to transform into austenite at the same temperature. However, the transformation is not finished until the temperature according to A3 is reached. In the area between the two lines, A1 and A3, both ferrite and austenite coexist.