As for the subdomain issue and its question, it seems it is just another one of Googles many vulnerabilities. As first posted on
DP, then on
TW, a spammer was able to get billions of subdomains into the Google index and ranking pretty well for some decent keywords. Sure Google has since been correcting this problem "by hand", but the vulnerability seems to still be there.
My feelings are if you are in the envious position to have a somewhat "white listed" or "trusted" domain like the hotels.com or statelinetack.com, abusing Google trust factor with subdomains (regardless of content being duplicated or not) seems to still work fairly easily.
Another write up on on the spammer and Google to give you more of a idea on what happen a couple of weeks ago:
Pushing Bad Data - Google's Latest Black Eye