"Work out": typically refers to someone who lifts weights, or goes to a gym specifically for physical fitness. "Exercise": this can include "playing sports" or "working out", but also includes other things that don't fall into those two categories, like jogging, jumping rope, calisthenics, etc. "Playing sports": usually refers to playing physical games that are officially recognized by others as such, like US football, soccer, cross country, wrestling, martial arts, golf, competitive swimming, basketball, etc. They are all related, but there are subtle differences between the three.