SEW has a great thread going that clarifies when it is best to use a folder structure, a subdomain structure, or a different domain structure. This question comes up a lot, and the answers given in the thread are top-notch. Ian clearly explains when it is best to use which type of structure, depending upon your linking strategy and goals.

About the Author: Donna Fontenot

Donna Fontenot, aka DazzlinDonna, is an Internet Entrepreneur and SEO, who has long utilized search engine optimization and affiliate marketing to create a successful online business. Her goal as an ebusiness coach is to help others make a living online from the comfort of their homes (and in their pajamas). Her motto is "You'll never shine if you don't glow."