My understanding is that once you've installed SH3, even if you uninstall it using the provided Uninstall feature some residual files and registry entries can remain on your system. When you fire up the reinstall program again, it sees what's left from the previous installation and just reinstalls the game in the same place it was before.
As Vendor has noted, to completely remove any traces of the game from your system, follow the usual uninstall procedure and then manually delete any files or folders that remain (including the SH3 folder created by the game in My Documents). Then run a registry cleaner program to remove any entries that SH3 made in your registry.
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