Subcon is established as the land of dreams in the manual. But then the manual goes on to imply Mario's entering it while awake, so it's something of a double-bluff!
Edit: In fact, taking the manual at face value: Mario dreamed about dreaming about Subcon, then dreamed about waking up, then dreamed about going on a picnic, then dreamed about entering Subcon. My head hurts.
Edit2: So hang on, does that mean that Subcon^2 is the one that's actually being subjugated? For all we know perhaps Wart is a benevolent ruler in Subcon, but someone in Subcon is dreaming about him being a despot which is what Mario saw in Subcon^2.
Did Mario just exact an undeserved regime change in Subcon?