A subdomain is a part of a web address which is under the main domain name, such as name.example.com. From a technical perspective, even in www.example.com the "www" element is a subdomain because the fully qualified domain name is just "example.com". Every subdomain can have its own site and records and can also be hosted through a different provider if you wish to use a specific feature that's not offered by your current service provider. An example for using a subdomain is if you have a business website along with an online store under a subdomain where clients can buy your products. You can also have a forum in which they can comment on the products and by employing subdomains as an alternative to subfolders you will avoid any probability of all sites going down when you perform maintenance, or update one of the website scripts. Keeping your sites separated is also more secure in the event of a script security breach.
