Your domain is a folder that contains your site files; a subdirectory is a folder contained within this main folder (such as http://sitecreatorz.com/subdirectory). A subdomain, on the other hand, is basically an alias, another address that can be created for one of your subdirectories. An Internet user can enter the subdomain in his browser's address bar to view the subdirectory with which it's associated.
A subdomain combines a unique identifier with a domain name to become essentially a "domain within a domain." The unique identifier simply replaces the www in the web address. Yahoo!, for example, uses subdomains such as mail.yahoo.com and music.yahoo.com to reference its mail and music services, under the umbrella of www.yahoo.com.
