Is sub-domain better or sub-folder?

directory, dns, seo

Solution

Search engines will treat subdomains more like separate domains, so it many cases using sub-folders is the way to go, so that you are not spreading yourself to thin.

using both is a bad idea, as search engines will try to index both, and one will get flagged as duplicate content.

Here's an article from SEOMoz explaining it in more detail: http://www.seomoz.org/blog/understanding-root-domains-subdomains-vs-subfolders-microsites

Problem

I have a classifieds site and I want to know whether creating subdomains or sub-folders is better, as I am in state of confusion. If we need to take sub-domains then what are the benefits which we can get from sub-domains? If we need to take sub-folders then what are the benefits we can get from them? If we create sub-domains then Google considers sub-domains as individual domains and would show only 2 results per page. So please clear my doubts and let me know which one is better.

Original source