If you rewrite the URI, the search engines will see a subdomain -- and (currently at least) they will treat it as a new independent domain.

My advice to clients is only to create a subdomain if you have a solid business purpose for it -- that is, the content will function as an independent website with it's own unique theme, and you will be creating regularly updated content in significant amounts. Otherwise, I feel it is much better to use a directory.

One big issue is that a new directory on an established domain has fewer hurdles to clear in order for its pages to rank. Ranking pages on what is, in essence, a new domain, is a lot harder. Domain history has become a very important factor in ranking algorithms, and starting with a "new domain" is starting a new history.

Also, the abuse of subdomains is a long time spammer approach, so how search engines will treat a new subdomain with only a few pages is an area that is most definitely under intense scrutiny. Under-developed subdomains stand a good chance of being collateral damage in the SE/spam wars, in my opinion.