The Subdomains tab carves sections out of your domain - blog.yourdomain.com, shop.yourdomain.com - each with its own folder.
Press Create:
- Name - just the first label ("blog"); the page shows the full name it will become.
- Domain - which of your domains it hangs off.
- Document root - the folder its files live in; a default is suggested.
- PHP - the PHP version it runs, independent of the main site if you need that.
- SSL - note the hint: the certificate situation of a fresh subdomain is described right there.
A subdomain is a separate website in every practical sense: its own folder in Files, its own entry in DNS. Deleting one removes the subdomain, and asks first.