Sub domains are domains within a domain, and are commonly used to better categorize a web site. The sub domain appears before the first dot in the domain name. For example, subdomain.domain.com. Sub domains are free and easy to create, and most hosting providers let you create an infinite amount of sub domains. Sub domains are often issued by web 2.0 sites that let you have your own mini site on their site, like a blogger.com or blogspot blog.
Some people advocate the advantages of subdomains and how they can be used for better site organization and search engine optimization. If you're planning on becoming a serious webmaster you'll need to learn the ins and outs of sub domains.