The concept of ibays within E-smith allows you to organize data or sub-components of a website into different directories. The standard way of accessing these ibays via the web is http://www.domain.com/ibayname. As well, if you have multiple "real" domains (this means you own a domain name and can control the DNS to point to your e-smith server), you can add a domain such as www.domain2.com and have it point to the content of a specific ibay.
However, there is a third option. You can have a sub-domain point at an ibay, and the process is pretty much exactly the same as having a top-level domain.
Step 3 is usually the most complicated, mainly because there are many different options. Personally, I use EasyDNS and their DNS-Only package to manage all my e-smith hosted domains.
See Using EasyDNS to manage external DNS for e-smith for more information.
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