Overlay network

An overlay network encapsulates tenant traffic so that private address spaces can overlap and move freely across hosts.

An overlay network is a virtual network that runs on top of the physical network and encapsulates tenant traffic. Encapsulation lets the private address spaces of different tenants overlap. Encapsulation also lets those address spaces move freely across hosts. As a result, the machines of one tenant appear to be on a private network regardless of where the machines physically sit.