The Theory of Docker Overlay Networking

First and foremost, Docker uses VXLAN tunnels to create virtual layer 2 overlay networks. So, let’s do a quick VXLAN primer.

VXLAN primer

At the highest level, Docker uses VXLANs to create layer 2 networks on top of existing layer 3 infrastructure. That's a lot of jargon that means you can create simple networks on top of complex networks. The hands-on example in the previous sections created a new 10.0.0.0/24 layer 2 network that abstracted a more complex network topology below. The figure below and remember that your underlay network configuration was probably different.