Third-level domain names are often confused with sub domains. Confusion occurs because some hosting companies and registrars classify everything under “sub domains”. A third-level domain name is the portion of the domain name to the left of the TLD and the second-level name.

In sportsillustrated.cnn.com, “sports illustrated” is the third-level domain name.
Third-level domain names do not require a separate registration. The owner of the second-level domain name “owns” the third-level names, fourth-level names and so forth.
There is no limit to the “levels” of domain names.

Third, fourth and so on level names are generally used by large corporations and universities to further divide their domains into manageable levels. Management of hundreds or thousands of computers at the second level would be cumbersome so additional levels are created with management delegated further down the line.

To an average web site owner a second or third-level domain name is generally sufficient. Most often third-level names are used to achieve higher search engine placements. For example, if you sell widgets, you may want the domain widgets.yourdomain.com. This is because most search engines will rank a site higher when the search term appears in the domain name.