The Subtract Tool is a Shape Operation that takes two features that are overlapping and cuts the first selected feature to get rid of the overlap. This operation is particularly useful when creating a shape that must match up against a feature that has complex border geometry.
To use the Subtract Tool, select the first feature that you want to subtract any overlap with another feature. Select the other feature, and then the Subtract button becomes available to you. Clicking it will remove any overlap, creating a new shape that lines up perfectly even against the other.