Subdomain seems to be the defacto standard but a subfolder is much better for SEO

I've read a couple of different posts / comments from Matt Cutts that state subdomain vs subdirectory makes no difference for seo.

Do you have a quick explanation or link as to why a subdirectory is better?

I'm just thinking that if you're small Google won't recognize that it's actually part of the same page and treat it as two.

That's what I'm thinking so I'm trying to find a reason why everyone is hosting it on a subdomain. One reason may be that if you're hosting your blog separately on like for example WPEngine you need to have it on a subdomain or else you will not benefit from things like scaling (since it still needs to go through your server if it's a subfolder).