VXLAN is a protocol that allows large numbers of virtual LANs to be overlaid on a physical network by encapsulating Ethernet frames within UDP packets and transporting them over an IP network. It addresses the scalability limitations of VLANs in large multi-tenant cloud environments by using a 24-bit segment ID rather than a 12-bit VLAN ID. The document provides an overview of VXLAN, why it is used, key concepts like VTEPs and VNIs, and demonstrations of VXLAN configuration on Cisco and Arista switches.