Three compelling reasons to choose Subdomains over Subsites

1. Branding – each subsite has contextually different content - distinct products
2. The use of subsites increases relevance and hence the search ability of content with in the subsite.
3. Each subsite will eventually have it’s own full featured content and community

Examples of subdomains: (subdomain and separate domains are the same)

MONSTER.COM

http://www.monsterindia.com/
http://company.monsterindia.com/index.html
http://jobsearch.monsterindia.com/searchresult.html?loc=87

P&G

http://www.pgeverydaysolutions.com/pgeds/en_US/jsp/EDS_Page.jsp?pageID=HP
http://www.pg.com/en_US/index.shtml

YAHOO

http://cricket.yahoo.com/
http://in.yahoo.com/?p=us
http://www.yahoo.com/
http://new.music.yahoo.com/

GOOGLE

http://news.google.com
http://maps.google.com

References:

From the SEO GURU:

http://www.mattcutts.com/blog/subdomains-and-subdirectories/

http://www.googlelady.com/106/folders-vs-subdomains/
http://www.searchviews.com/index.php/archives/2008/07/seo-why-microsites-are-weakening-your-seo-results-%E2%80%93-dr-naveel-builds-your-immunity.php