What is the use or purpose of a VLAN in networking?
Can anyone point out a scenario where VLAN is useful?
We have one set of switches and separate vLans for general traffic, visitor connections (Internet only), Management traffic (iLO), SAN (iSCSI), and health remediation.
The Wikipedia article has a lot more information, including uses.
Initially because is more price-efficient to use a single physical infrastructure split up into multiple (virtual) LANs than it is to build separate physical infrastructures for each LAN environment.
At the root, that's it. Use logically separation rather than physical separation.
If you have to ask about VLAN uses then you've never worked with a managed switch environment. The uses are limited only by one's imagination and I've seen some very creative uses. The basic scenario is segregating traffic on a single switch. If you have two offices on a single switch you can put them on different VLANs so to those machines it looks like they're on different physical switches. If you hear the term Layer 3 switch that means the switch can act like a router to route traffic between those two VLANs without using an external router. A step up from that is if you have another group of computers on the other side of the building that you want to be part of one of those VLANs. You can do what's called trunking to do that across switches so despite being on different physical switches the machines all work like they're on the same switch.
There are a lot of other uses but it's hard to explain in a short text reply. There are books from Cisco just covering the topic of VLANs
In a word "segmentation". For example if you want to run more than one separate network in a single location you either have to run multiple network cables or use a VLAN...
See http://www.youtube.com/watch?v=9LHwbuWz1UM for a simple explanation from Cisco
None of the other answers are incorrect to this question, however segmentation is the best explanation of why someone would want to setup VLANs on their network. Because an example was asked for, I am also providing answer to this question.
In this example, imagine you have a lot of traffic on your network such as a heavy infrastructure of support machines all accessing a central database or application server.
Now let's just say your company decides to eliminate the $5k per month they are shelling out to the local telephone company for POTS lines and decide to implement a VoIP telephone system.
Ideally you would not want these two types of traffic on the same VLAN due to the fact that voice and data packets will have to compete for priority.
I will quote a really good article on this topic:
VoIP is much less tolerant of dropped packets than data services, and even low levels of latency can turn into significant delays or echoing when VoIP is used. Putting VoIP on its own VLAN lets you give it highest priority in the network, while allowing more fault-tolerant data processes to take the back seat.
There is also the added benefit of security. Once again, I will quote the above article (it is a good read, so I suggest checking it out if you want to know more):
Keeping your VoIP on a VLAN allows you to lock it down more tightly than if it's sharing pipelines with regular data.
In a large campus switched network, you need to use VLANs to separate the broadcast domains into smaller more manageable units. Once you get beyond a few hundred devices in your broadcast domain, your broadcast traffic gets to the point where it's making a serious negative impact on your network. Try finding a broadcast storm on a huge flat network with thousands of devices. Not so easy. Also, ACLs.