WP multisite (subdomain) is the answer – http://codex.wordpress.org/Create_A_Network
In addition you can install the WP Domain Mapping Plugin to run on other domains
You need to decide whether you want WP multisite subdomain or sub-directory installation. WP subdomain does exactly what you want, but WP subdir + domain mapping plugin allows you to have both (subdomain AND sub-directory). WP subdomain looks like this:
domain.com (main site)
site1.domain.com
site2.domain.com
WP subdirectory looks like this:
domain.com (main site)
domain.com/site1
domain.com/site2
With WP Domain Mapping plugin you can map any subsite above to another domain, for example:
site1.domain.com -> www.site1.com
site2.domain.com -> www.site2.com
[or]
domain.com/site1 -> www.site1.com
domain.com/site2 -> www.site2.com
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