I can actually speak from personal experience. I am not sure if your son has been actually diagnosed with night terrors or is just having a nightmare and responding as such as a child does, but I experienced night terrors for two years from ages 20-22. This may or may not be the same thing that your son is experiencing.
Basically, what it feels like is that you wake up, you see everything around you as if you were looking around in bed, but you are paralyzed and you see some sort of being/ demon/ whatever fear you have coming to get you. You hear it outside, coming through the door and you even see it. You also literally feel like you are suffocating/ dying, etc. For me, this happened when I was completely exhausted in college during my senior year. After I graduated, moved to Chicago and lived in my own studio, I had an experience where I was mugged and then chased when walking home after dark. It started happening constantly then until I moved back to my parents house across the country. I even moved in with a roommate, which didn't help. After I moved back in with my parents, the night terrors never returned. I moved out on my own again about a year later and never had another problem then either.
For me, once I was diagnosed with having them (which you always remember), I learned to tell myself that this was a dream and that it wasn't real. With night terrors, you aren't fully asleep, but you also aren't fully awake. It tends to happen right after going to bed or right before waking up and also when you sleep on your back. For me, I was old enough to learn to tell myself that it wasn't real. Your three year old is too young for that I would imagine.
I think it is good that your son is sharing a room with his sister. Has there been anything that could potentially upset him or stress him out in his life? Also, does he sleep on his back? Could you try helping him to sleep on his side?
I hope this helps. I know that since he is so young, you can't just tell him to tell himself that it isn't real, but hopefully this is a start.
I found this website to be a good resource when I went through it: http://www.nightterrors.org