VMware NSX overlay networks allow the creation of logical networks over an existing IP network fabric. This enables a highly scalable network design using a leaf and spine architecture, where the boundary between Layer 2 and Layer 3 networks is at the rack level (leafs) and all communication between racks is Layer 3 only through a set of spine routers.

VMware NSX logical networks span across all racks. However, there is a need to connect virtual workloads from the logical networks to the outside physical world (WAN, Internet, co-located physical servers, and so on). These networks are represented by a set of VLANs, and because there is no stretching of Layer 2 across the racks, they cannot be trunked everywhere. They are connected only to one (or two for redundancy) racks, and become the NSX Edge cluster.

The purpose of the NSX Edge cluster is to host virtual routers—edge service gateways that provide the connectivity between the physical world (VLANs) and virtual world (VXLAN logical switches). This does not mean that every NSX Edge gateway needs to be deployed there. If an NSX Edge gateway provides connectivity between two VXLAN logical switches, it can be deployed anywhere because logical switches span all clusters.