A WebmasterWorld thread points out an issue at MSN Search, where subdomains that are excessively linking between each other, tend to rank well in MSN Search. Well, MSN is aware of it, according to MSNdude;
It bothers us too, and it's on our list.
Wonder what else is on their list. :)
Forum discussion at WebmasterWorld.

Comments:
Richard Burckhardt
08/18/2006 07:14 pm
Doesn't exactly surprise me. Yahoo had an issue with us over the use of subdomains a few months ago. We felt we were totally white hat in our use of them, but the Yahoo gods didn't so we replaced them with subdirectories. And, Matt Cutts made mention that subdomains were on Google's list on a Webmaster Radio post not too long ago. Could subdomains be hsitory?