WordPress has the ability to be used in either a single site installation or with a multiple site installation. Multisite allows you to have multiple websites on the same WordPress install, the advantage of this is that all the sites will inherit the same themes and plugins. Allowing you to just have one code base used by multiple websites.
On a multisite install you have 2 choices how they are installed either with sub domains
or the sites can be installed in sub-directories
To enable WordPress multisite you simply have to add a new setting WP_ALLOW_MULTISITE onto your wp-config.php file.
When you log into your site you will see a new sub-menu under the tools menu for network setup.
This page is where you will choose if you want to have your multisite using sub-domains or directories. Upon selecting which option of multisite WordPress will generate code for you to enter into your wp-config.php and your .htaccess to enable the multisite option.
To see what other settings you can change in the wp-config.php try out our WP-Config Generator.