I've seen the AI create vassalages with one another a few times. I am assuming its the message in the Diplomatic Information to the effect of so and so has absolved diplomatic soverignty, etc. I could never tell who was the vassal of who. Personally, I have never been successful with getting a faction to become one of my vassals. Once, I had Milan completely wiped out as the HRE except for one province which was Jerusalem. I had their port blockaded for some time and eventually sent 3 stacks to wipe them out at once. Even before I attacked, I offered them to become my vassal and they refused.