The Domain Name System (DNS) has a tree structure or hierarchy, with each non-RR (resource record) node on the tree being a domain name. A subdomain is a domain that is part of a larger domain; the only domain that is not also a subdomain is the root domain. For example, west.example.com and east.example.com are subdomains of the example.com domain, which in turn is a subdomain of the com top-level domain (TLD). A "subdomain" expresses relative dependence, not absolute dependence: for example, wikipedia.org comprises a subdomain of the org domain, and en.wikipedia.org comprises a subdomain of the domain wikipedia.org. In theory, this subdivision can go down to 127 levels deep, and each DNS label can contain up to 63 characters, as long as the whole domain name does not exceed a total length of 255 characters. But in practice most domain registries limit at 253 characters.
A resource record, such a A(host), CNAME(alias) or MX (mail), should not be confused with a subdomain node. A subdomain does not point to any specific server location, while most resource records do (resource records that do not point to specific hosts contain specific data).  For example, development.acme.com would be a subdomain of acme.com. While dev-server-1.acme.com would be a host in the acme.com domain, dev-server-1 would not be a subdomain. Confusion on this point is being created because some web hosting and marketing companies (that lack technical expertise) are using incorrect terminology when requesting creation of host and cname records.
In the United Kingdom, the third level domain names are standard and branch off of the second-level domains, for example:
.ac.uk - academic (tertiary education, further education colleges and research establishments) and learned societies .co.uk - general use (usually commercial) .gov.uk - government (central and local) .judiciary.uk - courts (to be introduced in the near future) .ltd.uk - limited companies .me.uk - general use (usually personal) .mod.uk - Ministry of Defence and HM Forces public sites .net.uk - ISPs and network companies (unlike .net, use is restricted to these users) .nhs.uk - National Health Service institutions .nic.uk - network use only (Nominet UK) .org.uk - general use (usually for non-profit organisations) .parliament.uk - parliamentary use (only for the UK Parliament and the Scottish Parliament) .plc.uk - public limited companies .police.uk - police forces .sch.uk - Local Education Authorities, schools, primary and secondary education, community education
Subdomains are also used by organizations that wish to assign a unique name to a particular department, function, or service related to the organization. For example, a university might assign "cs" to the computer science department, such that a number of hosts could be used inside that subdomain, such as mail.cs.example.edu or www.cs.example.edu.
A vanity domain is a subdomain of an ISP's domain that is aliased to an individual user account, or a subdomain that expresses the individuality of the person on whose behalf it is registered.
Depending on application, a record inside a domain, or subdomain might refer to a hostname, or a service provided by a number of machines in a cluster. Some websites use different subdomains to point to different server clusters. For example, www.example.com points to Server Cluster 1 or Datacentre 1, and www2.example.com points to Server Cluster 2 or Datacentre 2, etc..
Subdomains v. directories
example.com/yn points to a directory within the example.com domain, not to a subdomain of example.com.