An addon domain is a domain name that points to its own folder within public_html and appears like a separate website from your primary domain and this type does require you to register the new domain name before you can host it.
A subdomain is an extension of your primary domain name (for example: subdomain.primarydomain.com), a subdomain doesn't need to be registered before you can host it as it is connected to the primary domain name.
To create an addon domain or sub domain, more directions are on the cpanel categories
