Virtual LANs (VLANs) enable a single physical LAN segment to be further isolated so that groups of ports are isolated from one another as if they were on physically different segments.
Configuring ESXi with VLANs is recommended for the following reasons.
It integrates the host into a pre-existing environment.
It isolates and secures network traffic.
It reduces network traffic congestion.
You can configure VLANs in ESXi using three methods: External Switch Tagging (EST), Virtual Switch Tagging (VST), and Virtual Guest Tagging (VGT).
With EST, all VLAN tagging of packets is performed on the physical switch. Host network adapters are connected to access ports on the physical switch. Port groups that are connected to the virtual switch must have their VLAN ID set to 0.
With VST, all VLAN tagging of packets is performed by the virtual switch before leaving the host. Host network adapters must be connected to trunk ports on the physical switch. Port groups that are connected to the virtual switch must have a VLAN ID between 1 and 4094.
With VGT, all VLAN tagging is done by the virtual machine. VLAN tags are preserved between the virtual machine networking stack and external switch when frames pass to and from virtual switches. Host network adapters must be connected to trunk ports on the physical switch. For a standard switch the VLAN ID of port groups with VGT must be set to 4095. For a distributed switch the VLAN trunking policy must include the range of the VLANs to which virtual machines are connected.
When using VGT, you must have an 802.1Q VLAN trunking driver installed on the virtual machine.