A subdomain is a domain name that is part of a main domain. It might be a separate website with its individual content. Sometimes they are called third-level domains.
Subdomains open subfolders in your account and are directly connected to the main domain. For example, if the main domain is yourdomain.com, the subdomain will look like this: subdomain.yourdomain.com.
They are very useful if you wish to create a page on your site, which is to be accessed through an easy-to-remember unique URL. Say you want to create a forum for your site, which people will be able to access when they typeforum.yourdomain.com in their browsers.
