I am trying to have the web site like craigslist.org, I already register domain name e.g mydomain.com
If I host this domain on godaddy.com
How would I have it like sandiego.mydomain.com or boston.mydomain.com and so forth...
Do I have to host all sub domain in 1 host like godaddy ?
How hard it is to host on more than 1 hosts ?
Does each domain have it own database or can it be share 1 database across all sub domain ? What is the best way to have this thing going. Thank you for your reply.

You can host a sub domain on another server, it's a matter of making an A record or C name entry in you domains zone. Once you've created the new record, you'll simply need to create the sub-domain on the other server.

I think that you just need to consider subdomain as other domain names. And moreover: have you thought for the SEO already? I think if you are thinking about that you need to make sure that you are really want sub domains. Because dirrectories like yourdomain.co/sandiego/ are more valued for SEO effect.
Ihope you understand me here and hope that will help you

Most web hosts provide the option for easily setting up subdomains.. sandiego.yourdomain.com, etc..

If you are using CPanel, just hit the "Sub Domains" icon in your Cpanel.