Software defined groups of host on a local area network (LAN) that communicate as if they were on the same wire, even though they are physically on different LAN segments throughout a site. To define a virtual LAN, the network administrator uses a virtual LAN management utility to establish membersip rules that determine which hostss are in a specific virtual LAN. Many models may exist but two seem to dominate:
(1) Vitual Segment (or Port-Group) Virtual LAN. These are switched at the data link layer (OSI layer 2). Virtual segments turn an arbitrary number of physical segments into a single virtual segment that funtions as a self-contained traffic domain.
(2) Virtual Subnet Virtual LAN: These are switched at the Network Layer (OSI layer 3). Subnet-oriented virtual LANs are based on subnet addresses used by IP, IPX, and other network layer protocols to normally identify physical networks. Administrators assign one subnet address to a number of switch ports (which may be on different switches and over a backbone). Once identified as a virtual subnet, the selected LANs function as a bridge group - traffic is bridged at Layer 2 within the virtual subnet and routed at Layer 3 between virtual subnets.
["The many faces of virtual LANs", Steven King, Network World, 1994/5?].