With Virtual Switch Tagging (VST), Ethernet layer-2 frames are tagged at the virtual switch layer. For this implementation to work, the physical NIC carrying the traffic should be connected to a physical switch port, which is configured to trunk the necessary VLANs. The virtual machine or VMkernel port groups created on the vSwitch will then need to be configured with the VLAN IDs of their respective subnets.

This is the most common and favored implementation in most large/medium/small environments, not just because of the flexibility it offers but also because of the fact that most modern day blade system environments have reduced the number of physical NIC ports on the server hardware, owing to the advent of 10 Gbps Ethernet:

In VST mode, when a frame from a virtual machine enters a virtual switch, it is assigned a VLAN number. The VLAN number should already be configured on the port group the virtual machine is connected to. The VLAN tag will then be carried over from the active physical NIC to the trunk port on the physical switch. When a frame enters a virtual switch from the physical switch, it will untag the frame and then switch the frame to the virtual machine.