VRF

VRF stands for virtual routing and forwarding.

Most commonly used in MPLS networks, VRF is where a single router can have multiple routing planes. This means that one router can have multiple routing tables with completely different routing decisions made in the same box.

Imagine a MPLS service provider. In one machine, you have to ensure that multiple clients are routed correctly within each clients own cloud through one physical network. To make this possible, VRF must be enabled so each client's MPLS cloud will have their own routing table. Without this, the clients will need a separate set of routers/switches to forward their traffic - which, as you can imagine, will be too expensive. Therefore, by virtualizing the routing planes, you can "simulate" multiple layer 3 devices.

Not only does this provide cost savings, it provides an increased level of security as routing decisions can be separated in the same physical box. This also means that the same IP address can be used in different VRFs on the same router. (This is not recommended due to confusion - but it is possible with good reason.)


References:
http://en.wikipedia.org/wiki/VRF