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.
It is also possible to update the site using rsync. This is very efficient if you have a master copy and want to update the web server from it. This is also a good idea as we cannot guarantee never to lose your web site so you should keep a copy. Use rsync to your web site name, e.g. www.example.com and the rsync name and rysnc section which is your domain, e.g. example.com and your password for that domain. if you have set a password for a sub domain use the rsync name as the sub domain.
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