new User blogs subdomain are not being created

Hi there,
just installed WordPress MU 2.9.1. a couple of weeks ago -
now am just testing it, it seems that whenever a new user signs up and gets a confirmatino email :

eg (i did a test signup with these details)

Thanks for registering! To complete the activation of your account and blog, please click the following link:

After you activate, you can visit your blog here:

the link does not work - i emailed the hosting companyy and they said teh subdomain was not created?
just wondering what might the problem and solution be in this case? what is going wrong?