Subdomains VS Directories

Submitted by digitalpromotions on Tue, 06/03/2008 - 22:09.
Hi, I'm in the process of building out a large, content heavy site for SEO and affiliate traffic. I'm wondering about the pro's and con's of using category keywords as the subdomain vs putting it behind the top level domain in a directory. So the question is which is a better SEO structure for sites that will have a lot of content?
keyword.site.com vs www.site.com/keyword

I think Yahoo offers an excellent example of how/when to use sub-domains:
http://autos.yahoo.com/
http://personals.yahoo.com/
http://hotjobs.yahoo.com/
A few observations:
- The categories are completely different
- The sites look completely different, and could stand on their own under a different domain
If your site could be broken into separate sites (like Yahoo) use sub-domains, otherwise just use sub directories.
For instance,
I have www.domain.com/blog
but blog.domain.com resolves to it also.