subdomain means domain within a domain. http://hubpages.com is the domain name of the hub web address. Your subdomain will be http://padmendra.hubpages.com
Subdomain name is being insisted to restrict hubbers having poor quality hubs from mixing with hubbers having good quality hubs. traffic to good quality hubs has decreased in the past few months due to this mixing. It is good in the sense that it makes your hubs more visible in the eyes of search engines. you can find your profile page typing above address in the browser. It is claimed that traffic would increase if all the hubbers are assigned subdomain. If you do not agree to subdomain allotment, it will be done automatically by August 10, 2011.
Basically, a sub-domain is a secondary domain. Say you had a main domain like "www.buycars.com" but you wanted to have another url go to the same domain, you could have "www.buytrucks.com" or "www.buyacar.com"
premsingh is correct. The sub-domain is a precursor to your base domain. While I can't speak in-depth of the Hubpages su-domain policy, but the way it works sub.domain.ext is correct. So, you might have one like biz said www.buycars.com and you want to try and get traffic geared more toward buying toyota cars. Most SEO people will tell you it's best to have www.buycars.com and www.buytoyotacars.com or www.buytoyotas.com or some such thing. However, to save money many will instead keep www.buycars.com and not buy a new domain just do www.toyota.buycars.com. I've seen it work and help with searches, however, I haven't seen it help as much as I wish it would.
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