A subdomain is a third level domain that points to a directory on the same site as your original domain. For example, your main domain may be http://lollies.com, a subdomain for this may be http://boiled.lollies.com.
Be aware that http://www.lollies.com is setup by default and you do not have to pay extra for this. http://www.lollies.com is also mapped to the exact same space as http://lollies.com (not to a directory).
If you ordered the subdomain http://boiled.lollies.com,
the directory this is mapped to would be:
/home/lollies/boiled
Put your files in these locations and they will appear at http://boiled.lollies.com