A sub-domain is a domain that an organization's DNS administrator created to make managing the DNS simpler or at least more logical.
Take a college campus for example. The DNS administrator for Berkeley might create a sub-domains for:
- Administration
- Faculty
- Computer Science Department
- Liberal Arts departments
- Science departments
- Research labs
...or for whatever else the administrator might set up. Note that sub-domains are totally at the discretion of the DNS administrator. Once the root has delegated to the DNS server managed by the organization who registered the domain, the organization can do whatever they please with resolution.
The DNS administrator would configure the berkeley.edu DNS server to delegate responsibility to another DNS machine located in the Computer Science department. The Computer Science department might delegate to their laboratory's DNS server for the Laboratory's DNS.