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A web server refers to the software that helps to deliver web content that can be accessed either through the Internet or through an intranet. The primary function of a web server is to store, process and deliver web pages to clients. The communication between client and server takes place using the Hypertext Transfer Protocol (HTTP). The most common use of web servers is to host websites, but there are other uses such as gaming, data storage, running enterprise applications, handling email, FTP, etc.
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First, you set up the webhosting part at hosting #2 for the domain name subdomain.mydomain.com,
so the webserver will serve content for that domain. Then, you'll have to set up a DNS entry at hosting #1
to let the entry subdomain.mydomain.com ponit to the IP of the box you run at hosting #2.
That should be all.
--TheDoctor