Subdomains are third level domains, and are expressed like; sub.domain.com. They are used to organize data, and sometimes to divide websites. You can use a subdomain to host a website seperate from your domain name.
For example, if you own domain.com and you decide to set up a website for your sales department, you are able to do so by creating the subdomain "sales.domain.com". Subdomains can be independent websites with independent file and folder structures. Each package can utilize the subdomain feature.