Explanation
Overlay virtual networks are virtual logical networks constructed on top of an existing network using network virtualization technologies45. They decouple network services from the physical networking and interconnection technologies on the underlay network45. Two true statements about overlay virtual networks are:
Overlay virtual networks work well on an IP spine-and-leaf topology6. They can be created over underlay networks using network virtualization technologies4.
Overlay virtual networks allow both Layer 2 and Layer 3 communication65. They can serve not only different services (such as multiple departments) of the same tenant but also different tenants4.
References from Juniper site: Microsoft Learn, Huawei IP Encyclopedia, Network Insight