VTEPs connect between Overlay and Underlay network and they are responsible for encapsulating frame into VXLAN packets to send across IP network (Underlay) then decapsulating when the packets leaves the VXLAN tunnel. VTEPs connect between Overlay and Underlay network and they are responsible for encapsulating frame into VXLAN packets to send across IP network (Underlay) then decapsulating when the packets leaves the VXLAN tunnel.