A VLAN is a logical subnetwork of devices in a broadcast domain that is partitioned by network switches and/or network management software to act as its own distinct LAN. Switches that support VLANs give network managers the ability to create flexible virtual network segments that are independent of the underlying physical wired or wireless topology.
VLANs operate at either Layer 2 (data-link layer) or Layer 3 (network layer), depending on the design of the network. Several different network protocols support VLANs, most notably Ethernet and Wi-Fi.
Source:: Network World – Data Center