One other benefit (that may be specific to how we do things) can be found for people who are wanting to test things out before transferring their domains to us from another host, or have done so but want to test things out before the domain propagates.
For example, a person who hosts "mywebsite.com" with another host may want to set up a test copy of that site at my "mywebsite.dreamhost.com" until they know they like our service (which INVARIABLY happens, right? :>) and are comfortable making the switch.
The biggest benefit of a sub-domain, though, is in branding. Something under a sub-domain seems to look more 'important' than something in a sub-directory. Also, with sub-directories, you would almost expect it to be a portion of the root site under that domain, rather than an entirely different site.
Sure, these may not be super great benefits, but we give so many sub-domains away with our plans it usually doesn't hurt to use them.
- Jeff @ DreamHost
- DH Discussion Forum Admin