Please explain this about WPMU

Hi

New to WPMU. I understand that there is the facility to create sub-domains. I have two questions

1. Are these actually created on the Server or are they in fact ‘virtual’ ?

2. Is there a plug-in or method for a user registration system where they can choose the sub-domain (myownname.domain.com) and have an email address created using this ?

All help appreciated!

Thanks

John