I have had a few people ask recently about the changes made with the way Google views subdomains. Let me see if I can clear up some of the confusion.

Basically sites subdomains will be treated as folders except for user based sites like user.wordpress.com ect.

User based subdomains will still be counted as backlinks,you can check this yourself by visiting google and typing link:google.com – You will see that google itself has many backlinks from user based subdomains.

Google’s own Matt Cutts had something to say on the subject that really helps to clarify the situation.

For several years Google has used something called “host crowding,” which means that Google will show up to two results from each hostname/subdomain of a domain name. That approach works very well to show 1-2 results from a subdomain, but we did hear complaints that for some types of searches (e.g. esoteric or long-tail searches), Google could return a search page with lots of results all from one domain. In the last few weeks we changed our algorithms to make that less likely to happen

Hope this helps you to better understand the changes that have been made.