If like me you have seen this message while trying to add 'www' as a subdomain inorder to get your own domain working:
'Already used, please remove previous mapping first . '
The above process mentioned in other answers has changed slightly if you are using Google Apps for your domain.
You must now do this as well:
Google Apps -> Service Settings -> Sites. Click 'Web address mapping' and remove the 'www' mapping which has been added by default to Sites.
Then you can add the 'www' subdomain for your App engine app
see this link:
http://groups.google.com/group/google-appengine/web/deleting-existing-www-mapping-from-google-apps