Nope! I've never heard the term in my life before.
In 3dsmax any multiple material applied to a single mesh is known as a Multi/SubObject material... so I guess maybe that's what he's talking about? Or maybe it's programmer-ese ... either way he sounds a bit confused.
Is he a coder? On the programming side, technically speaking any model that makes it into a game engine gets split up into seperate meshes per material. That *might* be what he's referring to.
He's probably speaking in hl/hl2 smd compiling terms. A "submodel" would be a seperate .smd reference mesh that's compiled into the model with a modelgroup in the .qc file, which is togglable from the code side of things. Submodels may be helmets, loaded holsters, etc...
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In 3dsmax any multiple material applied to a single mesh is known as a Multi/SubObject material... so I guess maybe that's what he's talking about? Or maybe it's programmer-ese ... either way he sounds a bit confused.