Consider your domain/hostname to be the same thing as a "Virtual Name". The SQL Server has an IP.. let's say it's 192.168.0.128 (I'm using a local IP as this is just an example). That's the IP your SQL server is on. So when you create the domain/hostname "mysql.mydomain.com", all it's doing is pointing to that IP address of your SQL Server. So you could technically point hundreds if not thousands of sub/domain names at that IP address, but they would all be seen by the SQL Server as the same: An inbound connection attempting to access its resources.
So in the end, it just depends on which SQL Server you're on. The way they have it setup, I presume, is that there are X amount of users per SQL Database. So let's say there are 100 users per database. That means there could be in upwards of 100+ different domain names connecting to that SQL Server and thus, 100+ different possibilities of someone taking the name of the database you wanted to create.
Now mind you, my "100+" statistic is completely random and I imagine it may even be overkill, so please keep in mind that it was just used as an example
Hopefully that clears it up a little for you?
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