Sub domains are handled specially on the server. The web site will have a root directory structure that you can access by ftp. If you have a password for the main domain (e.g. example.com) but logged in by ftp to a sub domain (e.g. www.example.com) then you find yourself in a www sub directory. Each directory in the file system is treated the same as a sub domain. So if you made a sub directory test with a directory in it called thisisa and then set up a suitable DNS record for thisisa.test.example.com then that would refer to the /test/thisisa directory. Mostly people only use www as a sub domain and that is the directory in which they put their site. Obviously sub directories also work as normal, i.e. the previous example would work as test.example.com/thisisa.
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