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We have recently added a free subdomain for SEO purposes. We are getting a high position in searches, but the problem is Google is not showing our main website in some of our keywords any more.
I have read in blogs that there is no connection between domains and subdomains regarding SEO, but it seems to be wrong. Our main website (example.com) has a PR=5 and our subdomain (free.example.com) has a PR=3.
You have read conflicting things probably because the way Google treats domains and subdomains changed early last year.
Currently, Google sees a subdomain and a main domain as seperate things. Take a look at this article from Moz.
The response from Stephen was correct, in 2010... (see date of the answer from Vanessa) when that article was posted.
This is no longer the case.
Google does not usually consider a subdomain to be a separate site. See Do subdomains help/hurt SEO?
When you use similar content on your subdomain, Google has to pick one of your pages to rank for those keywords. It may be picking the subdomain because it is "fresh". If this is the case, it probably won't rank for long. It also may be picking the subdomain because it appears to be popular.
