What is Addon Domain
In single hosting account we can host multiple websites which can be done by using Addon Domains.
For Example: You like single hosting account for 10 websites, Then you register your hosting space which points a single domain(that domain name will be set while buying hosting space). After that you can login to the hosting control panel there you have option to add Addon Domains those addon domain names will point to subdirectories within your account.
addon-doamin1.com -> ~/public_html/addon-domain1
addon-domain2.com -> ~/public_html/addon-domain2
addon-domain3.com -> ~/public_html/addon-domain3
What is Sub Domain
In order to create a subdomain there is no need to register a sub domain name. This can be done by just adding subdomain entry from your hosting control panel.
subdoamin.maindomain.com -> ~/public_html/subdomain
subdomain.addon-domain1.com -> ~/public_html/addon-domain/subdomain