The word "virtualization" is thrown around so much that it's hard to always know what it means. A virtual switch is usually a large, high port count director-class product, which can logically partition some number of its physical ports to create one or more logical switches within the physical director. Each virtual switch can then function as an independent switch on different fabrics or on the same fabric. Partitioning a switch can help to segregate traffic. It's similar to partitioning a server where one physical server runs multiple virtual machines -- a VMware environment is one common example. [For more relevant product details, see the All-In-One Buying Guide to Storage Virtualization.]
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The other idea is a virtual storage area network (SAN) where it is possible to create multiple subnetworks or subfabrics that are physically interconnected, but logically isolated. This is similar to a network virtual LAN where the LANs are physically connected, but virtually isolated to keep local traffic local and keep network or management traffic from propagating out over the network unnecessarily. In practice, a virtual SAN can also combine separate physical fabrics (SAN islands) into a single logical SAN, which can often improve SAN resource utilization.
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Virtual SAN purchase considerations