NFV is the abstraction of the physical network to support the running of multiple network logical instances on a common, shared, and physical element. Network instances that are virtualized essentially function similarly to the equivalent physical instance.

A prominent example of network virtualization is VLAN. A VLAN is an abstraction of a physical switch in simple terms; it splits a single L2 broadcast domain into smaller logical domains that coexist without intercommunication between them. Communication between such domains requires the implementation of a layer three switch or a router.

Earlier implementations of network virtualization supported layer two (switching) and layer three (routing) services, but layer four to layer seven services such as firewalls and load balancers are now fully supported by network visualization.

Network virtualization maximizes the physical resources and ultimately grants full control, security, and efficiency to the network administration. It also cuts down the high cost of physical elements when compared to the virtual instances. The operational cost of elements such as cooling, power, and special requirements are cut down.