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VXLAN defines a MAC-in-UDP encapsulation scheme where the original Layer 2 frame has a VXLAN header added and is then placed in a UDP-IP packet. With this MAC-in-UDP encapsulation, VXLAN tunnels Layer 2 network over Layer 3 network.
VLANs divide broadcast domains in a LAN environment. Whenever hosts in one VLAN need to communicate with hosts in another VLAN, the traffic must be routed between them. This is known as inter-VLAN routing. On Catalyst switches it is accomplished by the creation of Layer 3 interfaces (switch virtual interfaces (SVIs) ).