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Subnetting is a technique of dividing a full Class A, B, or C network into smaller networks. It defines how 1 or more bits are taken from the host portion and added to the network portion. Following are the advantages of this technique:

•  Saves IP addresses —Avoids the need to assign an entire IP range within a network to one location.
•  Simplifies network management—Smaller, independent subnets can be created by routers. Internal networks can be restructured without impacting DMZ or external networks.
•  Reduces network traffic —Links with high network traffic can be isolated to a subnet. Examples are NFS and backup subnets. NFS client (such as a filer) interfaces can be on a one subnet and backup server and dedicated client NICs on another.
•  Improves security —It is easy to keep DMZ and front-facing networks separated from internal networks.

Subnetting requires taking a bit from the host portion and giving it to the network portion. The more bits we steal from host portion, the more the number of subnets. But more subnets come at the expense of IPs that would otherwise be used for hosts. Each new subnet requires two IP addresses: one for the network ID and the other for its broadcast ID.