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Originally Posted by NickPapageorgio
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I don't know if it still holds true, but Google used to treat a subdomain as a more of a stand-alone site. If you promote it, it gains PR seperately from the main site and can get higher rankings, depending on optimization.
Basically, if you had a site with a lot of unrelated subjects, rather than putting those into subdirectories, you would use sub-domains so you could segregate backlinks and get seperate PR and rankings. This way you wouldn't "dilute" your ranking/PR scores because of all the unrelated content.
Something like that - I need more coffee.