Whenever you purchase a web-hosting plan, you may be allowed to have certain number of Sub-Domains, Parked Domains and Add-On Domains in your account. This number differs from one hosting provider to another, but generally speaking most of the providers offer you certain number of each and some even allow you to have unlimited number of domains and sub domains.
So what is the difference?
The difference lies in the way you access your websites.
When you create a sub-domain for your website you will be asked to point that sub-domain to a particular directory on your website. Let say that your website’s URL is http://www.mysite.com and you installed a Bulletin Board application in a directory “forum”, then the full URL to that directory will be www.mysite.com/forum. Now you can create a sub domain named “forum” which will point to the URL [http://www.mysite.com/forum]. Internet users will be able to access your website by using either http://forum.mysite.com or [http://www.mysite.com/forum].
Parked domains allow you to point two or more different domains to the same web page. Let us presume that you have following domains http://www.mysite.com, http://www.my-site.biz, [http://www.my-other-site.com]. If these domains are parked domains and pointing to the same web page, no matter what address an Internet user will type in their browser, he will arrive to the same web page.
With add on domains you have an option of operating several different domains independent of each other. I showed in the above example domains http://www.mysite.com, http://www.my-site.biz, [http://www.my-other-site.com]. Will point Internet user to three different websites if these domains are designated as Add-On Domains.