A subnet is a smaller network within a larger network, created to improve performance and security. By dividing a larger network into subnets, organizations can manage traffic more efficiently and isolate different departments or functions. Each subnet has its own unique identifier, known as a subnet mask, which helps devices determine which part of the network they belong to. Subnets are essential for optimizing the use of IP addresses, especially in large networks. They allow for better organization and can enhance security by limiting access to certain areas of the network. This structure is crucial for network management in environments like corporate networks and data centers.