Summary: Layer 3 switches (sometimes it is a stripped down version called layer 2+) are needed to scale up smaller networks to larger networks. These larger networks are normally switched networks with multiple VLAN’s. If you need Layer3 switches, you enter the higher end of the switchs market. See our overview of layer 3 switches.
The history of Ethernet switches
We all know that an Ethernet switch was the next step of scaling up networks from a traditional hub. A switch made it possible to create one broadcast domain without the limitations of data collisions. Many users connected to one collolion domain will limit the datatraffic. An will create multiple collision domains and one bradcast domain.
The Ethernet switch has evolved from 10 Mbps to 100 Mbps, 1Gbps until 10Gbps. Bandwidth has increased substantially.
The next step for scaling up networks is to segment one broadcast (physical) network into multiple broadcast domains using VLAN’s. VLAN’s are also used to segment different kinds of traffic. One of the major purposes currently being used is to segment VoIP traffic into a separate VLAN.
The next step: Layer 3 switching
If you need to route traffic between VLAN’s you need a router that is part of those VLAN’s. Normally routers are not really equipped for large quantities of data. A layer 3 switch has specific hardware to process traffic.