The difference between a domain and subdomain is explained easily. While a domain name is a full website address, totally independent of other domain names, a sub domain depends on a domain name.
For example, if “myawesomedomain.com” is your domain name, then http://myawesomedomain.com and http://www.myawesomedomain.com would be your domain name’s address. Usually, these are referred to as "public" or "production sites.
A subdomain name would be a name in addition to your domain name. For example, http://subdomain1.myawesomedomain or http://dev.myawesomedomain.com. You get to choose subdomains by using your domain registrar's control panel. You might have a different site under each subdomain.
Often, site owners have us create http://dev.[your domain] as a "development site." This way, they freely work on the development site in a private location. Once the site is finished, we drop the subdomain and the site is "brought live" for the public.
If you would like assistance setting up a subdomain, see this article.