It uses the system locale to determine the sorting order of letters. My guess is that with your locale, it ignores whitespace.
$ cat foo.txt
v 1006
v10 1
v 1011
$ LC_ALL=C sort foo.txt
v 1006
v 1011
v10 1
$ LC_ALL=en_US.utf8 sort foo.txt
v 1006
v10 1
v 1011