Source : Free On-Line Dictionary of Computing

Virtual LAN
     
         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
        segment}s 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 address}es used by {IP}, {IPX}, and other
        {network layer} {protocol}s to normally identify physical
        networks.  Administrators assign one subnet address to a
        number of switch {port}s (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?].
     
        (1995-04-03)