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18.5. Isolated Mode

When using Isolated mode, guests connected to the virtual switch can communicate with each other, and with the host physical machine, but their traffic will not pass outside of the host physical machine, nor can they receive traffic from outside the host physical machine. Using dnsmasq in this mode is required for basic functionality such as DHCP. However, even if this network is isolated from any physical network, DNS names are still resolved. Therefore a situation can arise when DNS names resolve but ICMP echo request (ping) commands fail.
Virtual network switch in isolated mode

Figure 18.6. Virtual network switch in isolated mode