Understanding MPLS Layer 2 VPNs
In an MPLS Layer 2 VPN, traffic is forwarded to the provider edge (PE) router in Layer 2 format, carried by MPLS through an label-switched path (LSP) over the service provider network, and then converted back to Layer 2 format at the receiving customer edge (CE) router.
Routing occurs on the customer routers, typically on the CE router. The CE router connected to a service provider on a Layer 2 VPN must select the appropriate circuit on which to send traffic. The PE router receiving the traffic sends it across the network to the PE router on the outbound side. The PE routers need no information about the customer's routes or routing topology, and need only to determine the virtual tunnel through which to send the traffic.
Implementing a Layer 2 VPN on the router is similar to implementing a VPN using a Layer 2 technology such as Asynchronous Transfer Mode (ATM) or Frame Relay.