Addon Domains allow you to host an entirely seperate website from a subfolder of your main web hosting account.
Technically speaking, cPanel does this by creating a subdomain and parking your new domain on the subdomain.
This demonstration shows how to create an addon domain in cPanel.
Enter the domain name you wish to use as an addon domain name in the New Domain Name box.
Enter your chosen username in the Username/directory/subdomain Name box.
cPanel will create a subfolder in your public_html folder and a subdomain from your username.
Enter your chosen password for the addon domain in the Password box.
This password and your chosen username will be used to generate a FTP logon account which can access this addon domain only.