VXLAN (Virtual Extensible LAN)

Virtual Extensible LAN (VXLAN) is a proposed encapsulation protocol for running an overlay network on existing Layer 3 infrastructure. An overlay network is a virtual network that is built on top of existing network Layer 2 and Layer 3 technologies to support elastic compute architectures.

The primary goal of VXLAN is to extend the virtual LAN (VLAN) address space by adding a 24-bit segment ID and increasing the number of available IDs to 16 million. The VXLAN segment ID in each frame differentiates individual logical networks so millions of isolated Layer 2 VXLAN networks can co-exist on a common Layer 3 infrastructure. As with VLANs, only virtual machines (VMs) within the same logical network can communicate with each other.

Virtual Extensible LAN (VXLAN) is a network virtualization technology that attempts to improve the scalability problems associated with large cloud computing deployments.

Fundamentals of VXLAN

example case
http:// yellow-bricks.com/2012/11/02/vxlan-use-cases/