When you hire a wedding planner, he selects a caterer, a florist and a band, to prepare the food, arrange the flowers and play the music, respectively. You don't expect the planner to do all these things himself; you expect him to know how to organize and coordinate the experts in each field to pull off the perfect wedding. Similarly, a contractor hires specialists to operate the equipment, mix the concrete, install the plumbing and electricity, and do all the smaller jobs involved in building or renovating a house. General contractors plan out the whole project from start to finish and make sure it gets done correctly.
A contractor may have a certain number of employees on his permanent staff, in which case there might not be many or any subcontractors involved. He has to decide what makes the most economic sense. A contractor might not want a large staff because he never knows how many jobs he's going to have and doesn't want to pay for salaries and insurance when his workers aren't needed. Subcontractors are independent so there's no insurance or employment tax necessary when a contractor hires them. So using subcontractors instead of having a large staff allows the contractor to save money, which means he can charge you less.
Contractors know all about materials, building codes, safety, and other topics essential to home improvement projects. If you decide to bypass the contractor and hire the subcontractors yourself, aside from the knowledge and experience you'd be missing out on, you'd also be liable for injuries and damages. Contractors offer their own insurance and workers' compensation, plus they're responsible for fixing anything that goes wrong.