Sub domain names are not handled technically in the same way as regular domains (on the backend), for the most part they work the same way so far as the end user is concerned.
There are two significant reasons that sub domains are used: to allow users to register otherwise unavailable domain names or to organize large websites.
In the first instance, a sub domain is created when an existing domain owner allows you to register and use a new domain directly under their existing domain name, similar to how a regular Registry works.
These sub domains give the end user an opportunity to register a great sounding cheap domain name that would otherwise be unavailable at a regular Registry. Having been widely recognized and accepted by the Internet community, sub domain names are being used by many as their main website URL and are now being sold in the domain aftermarket as well.