Subdirectories represent levels of pages within each subdomain of your website. For example, if you have a blog which is located on your www. domain at www.yoursite.com/blog, www. is the subdomain and /blog is the subdirectory. A post example would look like this: www.yoursite.com/blog/blog-post-article.
Alternatively, you can set your blog as its own subdomain. Instead of www. you could set your subdomain as blog. or news., for example. A post URL would look like blog.yoursite.com/blog-post-article. You'll notice that there is no /blog subdirectory. In this case you don't need that extra level of hierarchy since you've set blog. as the subdomain.