Subvocalizing in the N-Back task means to repeat the letters subvocally (not aloud) so that to easier remember the sequence. It definitely helps to better remember the letters.
But there are different opinions on the benefits of this approach for the brain training process. Many claim that subvocalizing will harm the effectiveness of the training and makes the exercise of no use at all.
The way I do the n-back is by focusing my mind on the letter/position I am supposed to check/match against the current one. This includes mentally hearing the letter and seeing the square. Basically I sinc a kind of delayed repeat and just compare it to what is being displayed. Is this what is meant by subvocalizing, or does it mean something along the lines of keeping an explicit verbal list of the letters/positions(?) the way people remember phone numbers? And how do people know it is "bad"?
It seems to me that if you subvocalize and it improves your score, you will simply advance in difficulty to the point that your working memory and focus are completely taxed again. So why would it be harmful? It's very likely that some degree of subvocalizing is going on even when people try not to do so, and mentally suppressing it seems to introduce another cognitive process that is not supposed to be the domain of the test.