If you create a sub-domain with cPanel, for example, it will create a directory in public_html / www with the name you select. Files in that such directory can be accessed via sub-domain. I don't know if other interfaces work the same or not.
I think it depends on your hosting plan, but for me (hostgator) to create a subdomain, it can be done directly from cPanel. One of the options is "Subdomains".