Subnetting is a network design strategy that segregates a larger network into smaller components. While connected through the larger network, each subnetwork or subnet functions with a unique IP address. All systems that are assigned to a particular subnet will share values that are common for both the subnet and for the network as a whole.

A different approach to network construction can be thought of as subnetting in reverse. Known as CIDR, or Classless Inter-Domain Routing, this approach also creates a series of subnetworks. Rather than dividing an existing network into small components, CIDR takes smaller components and connects them into a larger network. This can often be the case when a business is acquired by a larger corporation. Instead of doing away with the network developed and used by the newly acquired business, the corporation chooses to continue operating that network as a subsidiary or an added component of the corporation’s network. In effect, the system of the purchased entity becomes a subnet of the parent company's network.

Subnetting involves the use of several tools in order to establish the series of subnetworks and allow them to still function as a complete system when necessary. There is the matter of connectivity. In order to allow the subnets to connect, a bridge or routing equipment is normally utilized. The assignment of IP addresses is also important to the proper construction of the subnetworks. Each device or user connected with a given subnetwork will be assigned an IP address utilizing the same prefix. Every subnetwork will have a different IP address prefix.

Splitting network sectors into a series of subnet components has a couple of practical advantages. First, by segregating the larger network into distinct but interconnected subsections, it is often easier to isolate performance issues and repair them without having to shut down the functions taking place in the other subnetworks. The process of subnetting can also enhance the process of maintaining the overall network, making it possible to perform diagnostics or other testing without slowing down or impacting the functionality of other components that make up the larger network.

As Internet usage has continued to become key to the technology many companies use for communication, data storage and transfer, and even general clerical functions, the ability of a traditional Class A, B, or C network to work with optimum efficiency has become more difficult. By employing the process of subnetting, the larger network can add or remove subnets as needed, and assign devices and other resources to a given subsection with relative ease. In terms of logical arrangement, subnetting enhances the ability to manage the larger network as well as help to structure subsections exactly as needed without having to modify protocols for the entire network.