When you set up the subdomain, Apache created a folder called whatever you called that subdomain (e.g., if you created a subdomain called "foo," then there should be a folder right under public_html called /foo). There shouldn't be anything in it other than a cgi-bin folder and possibly an index.php or index.html placeholder page, if even that. BlueHost is just warning you that it is placing files in that subdirectory/folder and that it will possibly overwrite anything that is there. cPanel usually refuses to install if there is an index.php file in place; you have to go in and delete it before proceeding. HTH
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