Subtext is what a character is really saying between the lines, and it is revealed by a character's actions and reactions.
If the text is the words we see on the page, the subtext is all the content underneath that is not announced explicitly by the characters but is understood by the reader or viewer as the scene, sequence, or screenplay unfolds.
Subtext has always been a part of storytelling. Novelists have no boundaries, free to go into any character's point of view and share his or her inner thoughts, wants, or desires with the reader. Playwrights have a harder time because they can't just always bring the audience into the head of a particular character at any given time, but there are a few tricks they can pull out of the bag. The dramatist can always use the helpful aside: when all action on the stage stops so one character can address the audience directly to express his or her thoughts and/or motives.
This may work well in a play, but how horrible it would be in a film. Imagine: every few minutes - record screech, b.g. action freezes, character looks directly into the camera, and explains.
In a screenplay, subtext can be found not in the words, but instead we see it beneath the spoken lines. Conflict, anger, happiness, guilt, envy, pride, any emotion can be acted. It shouldn’t be explained, and definitely not through dialogue. A character should never have to say, “Look at me! I’m having an emotion here!” The character just has it, projecting the emotion, thought, or motivation through action and indirection. It’s true: actions do speak louder than words.
Consider this simple example: A husband comes home late after a long day (and night) at the office. He’s drunk, hair tousled, a lipstick smudge on his collar. We walks in exhausted, puts down his briefcase, hangs his hat and coat, and enters the kitchen, where his wife washes dishes like they were bongo drums. The husband asks, “You okay, honey.” She coldly responds, “Fine!” And without giving him even the slightest glance, she punctuates her reply by slamming the cupboard door... Hard! She then promptly exits the room, leaving her husband standing there perplexed, until he spots the dinning room through the entry door. A look of deflated realization comes over him. We walks into the dinning room, where two places are set, cold but untouched food on one place setting and empty bottle of wine at the other. Between is a present and card. The card reads: “Happy Anniversary”.
She said she was “fine”, but clearly the subtext illustrates she is anything but. She’s angry, feeling taken for granted, and for good reason. We love the scene, not because it was spelled out for us. We love it because of the subtext. The writer gives us two plus two, but lets us do the math, and we feel smart when solve the equation.