When creating a new RDS MS SQL instance it requires a subnet group that spans multiple availability zones. I understand that this is different to Multi A-Z replication and that my instance will exist within a single availability region. So what is this actually doing when I'm adding this subnet group spanning different zones?
RDS uses the additional availability zone for storing backup data and logs for redundancy, the data for your instance is stored within the other availability zone.
More info can be found here:
https://aws.amazon.com/rds/faqs/
Q: Why does additional backup storage cost more than allocated DB Instance storage?
The storage provisioned to your DB Instance for your primary data is located within a single Availability Zone. When your database is backed up, the backup data (including transactions logs) is geo-redundantly replicated across multiple Availability Zones to provide even greater levels of data durability. The price for backup storage beyond your free allocation reflects this extra replication that occurs to maximize the durability of your critical backups.