Explanation:

In Azure, Network Security Groups (NSGs) control inbound and outbound traffic to network interfaces (NICs), subnets, and virtual machines (VMs) using rules based on priority and direction.
According to the Microsoft Azure Administrator Guide and Azure Networking documentation, the following principles apply:
Default NSG rules:
By default, an NSG denies all inbound traffic from the Internet except traffic originating from the same Virtual Network (VNet).
NSG allows all outbound traffic to the Internet.
Default inbound rules include:
Allow VNet inbound (priority 65000)
Allow Azure Load Balancer inbound (priority 65001)
Deny all inbound (priority 65500)
NSG associations:
NSGs can be associated either with a subnet or an individual network interface (NIC).
When both are applied, the NIC-level NSG takes precedence for inbound/outbound traffic.
If no explicit allow rule exists, default deny applies.
Analysis of Each Statement
1## From the internet, connect to VM1 by using RDP:
VM1's subnet (Subnet1) is associated with NSG1, which has only the default rules.
The default rules deny all inbound traffic from the Internet, including port 3389 (RDP).
# Therefore, RDP from the Internet is blocked.
2## From the internet, connect to VM2 by using RDP:
VM2's NIC is associated with NSG2, which includes a custom allow rule (priority 100) permitting TCP traffic on port 3389 from any source to any destination.
This rule overrides the default deny rule.
# Thus, RDP from the Internet is allowed.
3## From VM1, connect to VM2 by using RDP:
Both VMs reside in the same VNet (VNET1) but different subnets (Subnet1 and Subnet2).
The default NSG rule "Allow VNet Inbound" allows traffic between subnets within the same virtual network.
# Therefore, VM1 can connect to VM2 via RDP (port 3389).