While Hyper-V allows you to configure complex virtual network environments, the basic concept of virtual networking is straightforward. For a simple virtual network configuration, we recommend that you have at least two network adapters on the server running Hyper-V: one network adapter dedicated to the physical machine for remote management, and one or more network adapters dedicated to the virtual machines. If you are running an Internet SCSI (iSCSI) initiator for virtual hard disk storage, we recommend that you use additional network adapters in the management operating system. The management operating system is a partition that calls the Windows hypervisor and requests that new partitions are created. There can be only one management operating system. For information on the backup and recovery strategy for a virtualized server environment, see Planning for Backup.

When you add the Hyper-V role during a full installation of Windows Server 2008, you have the option to configure one or more external virtual networks.

When you install Hyper-V and create an external virtual network, the management operating system uses a new virtual network adapter to connect to the physical network. The network connections consist of the original network adapter and the new virtual network adapter. The original physical network adapter does not have anything bound to it. However, the virtual network adapter has all of the standard protocols and services bound to it.

Hyper-V binds the Virtual Network Service Protocol to a physical network adapter when an external virtual network is created. You should be aware that external network connectivity will be temporarily disrupted when an external virtual network is created or deleted.

Once it is created, a virtual network works just like a physical network except that the switch is software based and ports can be added or removed dynamically as they are needed.

Once an external virtual network is configured, all networking traffic is routed though the virtual switch. For this reason, we recommend using at least one additional physical network adapter for managing network traffic. The virtual switch functions as a physical switch would and routes networking traffic through the virtual network to its destination. The following image is an example of an external virtual network.

For internal virtual networks, only communication between virtual machines on the same physical server and between virtual machines and the management operating system is allowed. The following image is an example of an internal virtual network.

Use a private virtual network when you want to allow communication only between virtual machines on the same physical server. The following image is an example of a private virtual network.

In Hyper-V, when a virtual machine is created and attached to a virtual network, it connects using a virtual network adapter. There are two types of network adapters available for Hyper-V: a network adapter and a legacy network adapter. For the network adapter to work, integration services must be installed, which is part of the Hyper-V installation. If integration services cannot be installed because of the version of the operating system, the network adapter cannot be used. Instead, you need to add a legacy network adapter that emulates an Intel 21140-based PCI Fast Ethernet Adapter and works without installing a virtual machine driver. A legacy network adapter also supports network-based installations because it includes the ability to boot to the Pre-Boot Execution Environment (PXE). The legacy network adapter is also required if a virtual machine needs to boot from a network. You will need to disable the network adapter after the PXE boot.

The virtual machine is logically connected to a port on the virtual network. For a networking application on the virtual machine to connect to something externally, it is first routed through the virtual network adapter to the virtual port on the external virtual network to which the virtual machine is attached. The networking packet is then directed to the physical network adapter and out to an external physical network.

For the virtual machine to communicate with the management operating system, there are two options. One option is to route the network packet through the physical network adapter and out to the physical network, which then returns the packet back to the server running Hyper-V using the second physical network adapter. Another option is to route the network packet through the virtual network, which is more efficient. The option selected is determined by the virtual network. The virtual network includes a learning algorithm, which determines the most efficient port to direct traffic to and will send the network packet to that port. Until that determination is made by the virtual network, network packets are sent out to all virtual ports.