Network virtualization is a particular abstraction of the physical networking infrastructure that provides support for multiple logical (virtual) network infrastructures (for example, set of switches, routes, and links) on top of a common physical (real) infrastructure.

The analogy of network virtualization is depicted in the following diagram:

On the left side of this diagram we can see a conventional computer virtualization, which is the virtual machine environment. In this environment the physical processor (CPU), memory, and input/output are abstracted by a hypervisor, on top of which a virtual machine can be run. This hypervisor essentially ensures the isolation of access to underlying resources and resource management. Similarly, a physical network can also be virtualized. On the right side of the preceding diagram, the network virtualization layer shown is responsible for providing an isolated view of the physical network infrastructure. Building a virtual network requires the technology to build virtual nodes (for example, Xen virtual machine monitor, Linux network namespaces, Kernel-based Virtual Machine (KVM), VMware, and VirtualBox). There are also other possible ways to create virtual links. These are essentially based on tunneling technology.

One possibility is to get an Ethernet frame of a virtual node and encapsulate it in an IP packet that may travel through multiple hops in the network. This technique essentially provides a virtual Ethernet link using tunneling technology (for example, Ethernet Generic Routing Encapsulation (GRE) tunneling, Virtual Extensible Local Area Network (VxLAN), and Stateless Transport Tunneling (STT), among others).

There are also technologies such as Open vSwitch that provide virtual switches. It's worth mentioning that Software-Defined Networking (SDN) separates data plane and control plane, but the goal of network virtualization is to construct multiple virtual networks on top of a physical networking infrastructure.