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Data center fabric is a system of switches, servers & the interconnections between them, represented as a fabric and allows for a flattened architecture.
According to Dr. Mark Russinovich, a Technical Fellow working on the Windows Azure team, The Fabric Controller, which automates pretty much everything including new hardware installs, is a modified Windows Server 2008 OS.... The generic term fabric is a synonym for framework. Microsoft uses it in a proprietary manner to describe the servers, high-speed connections, load balancers and switches that make up the Azure cloud computing platform.