Setting up a Virtual LAN is one of the initial tasks when getting started with Hyper-V. It involves dedicating a physical network adapter (NIC) in the host machine to be used by the any VMs you create. You are able to create as many virtual LANs as you have NICs in the server. This process converts any NIC into a virtual switch to be used connected to as many VMS as you like.
As most servers nowadays come with at least 2 NICs built in you are presented with a number of choices for how you utilise them
Hyper-V R1 (ships with Windows Server 2008)
When you create an external virtual network in Hyper-V R1 the NIC that you select is shared with the host and the VMs.
If you look at the Network Connections control panel you will find another NIC has appeared. You can give this an IP address and it will act just like a real NIC. The physical NIC is converted to the virtual switch that Hyper-V will use.
The problem with this is that you potentially have a useless NIC for the host machine as there is already another NIC on board. In my own experience it confuses me a lot with how other networked devices communicate with the Hyper-V servers and how the VMs communicate with the host
Hyper-V R2 (ships with Windows Server 2008 R2)
In the R2 release of hyper-v, Microsoft gave you a bit more choice on how to utilise the physical network adapters. This time, when you create an external network, you are given a new check box to allow or disallow the host machine to share the connection.
By leaving this unchecked you can now have one NIC dedicated for the host and any other NICs dedicated purely to the Hyper-V virtual network
From the help file
The Allow management operating system to share this network adapter setting controls whether you can use this physical network adapter to access to the management operating system, which is operating system that runs the Hyper-V role. You can use this option to isolate the management operating system from communications between virtual machines and other computers on a physical network. However, this also means that you cannot connect to the management operating system remotely through this physical network adapter if this option is cleared.
If you are using the Hyper-V Manager console in Windows 7 (part of RSAT) then you may notice this checkbox is present even on remote R1 servers. However, if you try to disable it the console will return an error
These options are also available in the free Microsoft Hyper-V Server 2008 R1 & R2.
Update – Top Tip;
I hate how long it takes to get to the TCP/IP properties of a network adapter. The introduction of the Network & Sharing center is unnecessary in a server OS IMHO. Thankfully I discovered that by just typing “IP” in the Start menu search gets you straight to the “View Network Connections” windows displaying all of your network adapters!