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Virtual Ethernet is a virtual implementation of Ethernet and allows for communication between logical partitions or virtual machines without the need of assigning and configuring physical hardware on those partitions. Virtual Ethernet is the same set of communication standards and came about because the virtualization of servers required the virtualization of the Ethernet protocol.
Techopedia Explains Virtual Ethernet
Logical partitions are able to use virtual Ethernet via virtual Ethernet adapters. By using these virtual adapters, virtual machines can establish high speed communication with other virtual machines or logical partitions by using standard protocols like TCP/IP over the established virtual Ethernet communications ports.
To simplify, you can think of virtual Ethernet as the emulated form of Ethernet that is being used by virtual machines and other logical partitions in order to create a virtual LAN.
