A subdomain is a web address that exists under your web address and acts like an independent site. For example, my website is www.williamrice.com. This is a standard website, not a Moodle site. I could have a subdomain, http://www.moodle.williamrice.com, to hold a Moodle site. This subdomain would be like an independent site. However, it exists on the same server, under the same account, and they both count toward the disk space and the bandwidth that I use.
In this example, Moodle is installed in the http://www.moodle.williamrice.com subdomain.
Using a subdomain offers you several advantages. Having a site to test updates and add-ons may be helpful if uninterrupted service is important to you. Later, you'll see how easy it is to copy a Moodle installation to a different location, change a few settings, and have it work...
