Virtual machines on VMware ESX* hypervisors can communicate with each other via Virtual Switches, using the same protocols, as used on physical switches. A Virtual Machine (VM) can have multiple Ethernet adapters each with a unique IP address,thus imitating properties same as that of a physical computer. Virtual Ethernet Adapters are one of the key features of VMware Hypervisor stack. This allows a VM to communicate with another VM and with other virtual switch. Shown below is the video tutorial by rocksolidtechnical on how to create a Virtual Switch on VMware. Diagrammatically we can represent the multiple VMs communicating via Virtual Ethernet Adapters and Virtual Switches.Note the VMs are also capable of communicating with the outside physical network.