In the scenario where VMs are in the same Vswitch but in different Vlans, when they communicate between each other, does the traffic go out to the Router then back to another VM ?
Based on the concept of Vlans, they are Layer2.
in order for traffic to move between Vlans they need L3 device.
Seeing that Vswitch is not Layer 3, then I thought VM traffic from one Vlan, will have to go out of the ESX host to the Router then back to the other Vlan.
You need a router, but it could be a virtual one (inside another VM) on the same VM host. That has the advantage that traffic does not have to leave the vSwitch, operating at 10GB/s (theoretically).
in order for traffic to move between Vlans they need L3 device.
Seeing that Vswitch is not Layer 3, then I thought VM traffic from one Vlan, will have to go out of the ESX host to the Router then back to the other Vlan.