OpenStack Networking (Neutron)
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OpenVSwitch L2 Agent

This Agent uses the OpenVSwitch virtual switch to create L2 connectivity for instances, along with bridges created in conjunction with OpenStack Nova for filtering.

ovs-neutron-agent can be configured to use two different networking technologies to create tenant isolation, either GRE tunnels or VLAN tags.

VLAN Tags

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GRE Tunnels

GRE Tunneling is documented in depth in the Networking in too much detail by RedHat.

Further Reading