Joe Balestrino discusses the value of subdomains. The four key points are:

  1. Subdomains are treated as a domain as far as developing a new site is concerned.
  2. One way links from subdomains are valued as from a domain.
  3. They rank as well as a regular domain.
  4. Banning of a subdomain may lead to banning of the main domain. It has sometimes happened.

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I think the additional values of subdomains are:

  1. They allow you to maintain brand identity.
  2. It is much easier to get a subdomain name of choice.

In summary subdomains offer lower cost of developing new sites / web services for legitimate businesses.