A subdomain is sometimes known as a “domain within a domain” because they can be referenced just like a normal top level domain. For instance right.sample.com and left.sample.com are parts of sample.com but act almost as if they are their own root domain. This allows a reseller or website operator to assign space on their single server to multiple people, or design unique and separate areas without having to lease another server.
In theory, subdomains can go 127 levels deep but in practice it is usually limited to just the first couple of levels such as in the examples. Each label can be as many as 63 characters long. Typically subdomains are used to allocate server space to ISP clients. For instance lets say you run sample.com and have a customer named Tom and another named Sue. For the customer named Tom you could create tom.sample.com and for Sue, sue.sample.com. Separate usage and billing can then be setup for each customer and they can have their own areas to upload and manage their own files on the server.
Subdomains are a good way to manage and parse out server space to clients, or to designate a unique URL for a specific section of a larger website.