Subnetting is the process of dividing a single network into multiple small networks.

Converting host bits into network bits i.e. converting 0s into 1s

Subnetting helps in minimizing the wastage of IP address.

For Example :--

Suppose 
Engineering has = 40 hosts
HR has = 20 hosts
Sales has = 20 hosts
Technical Support has = 20 hosts
Executive Management has = 15 hosts

So in the above scenario we need,

40 IP for engineering department, 
20 IP for HR department,
20 IP for Sales department,
20 IP for Technical support,
15 IP for Executive Management

Which means that we will be using class C IP for all

40 IP for engineering department  192.168.1.X  
20 IP for HR department  192.168.2.X
20 IP for Sales department  192.168.3.X
20 IP for Technical support  192.168.4.X
15 IP for Executive Management  192.168.5.X

Class C has 256 IP but we are using only few IP address and rest IP are wasted.
So to minimize this wastage we do subnetting.

Types of Subnetting:-

FLSM:

a) Fixed length subnet Mask.
b) Equal parts division

VLSM:

a) Variable length subnet Mask.
b) Non-equal parts division