N1KV consists of VSMs and VEMs. While VEMs are software elements that reside inside the hypervisor, running as a part of the VMware ESXi kernel. The VEM acts like a line card to VSM and provides packet forwarding and other functions for virtual machines. Whereas VSM is deployed as a virtual appliance and provides control to manage multiple VEMs and virtual machine traffic steering. Have a look at the following diagram for more details:

The highlighted components in the preceding diagram are explained in the following sections.