Kiran,
When talking encryption, neither a GRE or IPIP tunnel will encrypt the traffic on their own. This process needs to be done using a second mechanism such as IPSec.
In terms of less overhead, the GRE header is 24 bytes and an IP header is 20 bytes.
When a GRE tunnel is built, the original packet is encapsulated within a GRE (IP Protocol 47) packet and send to the configured tunnel destination. Similarly, when using IPIP tunnels, the original packet to be sent is encapsulated within a new IP packet and transmitted to the tunnel destination. When looking at an IPIP packet with a protocol analyzer, the packet will appear to have two IP headers within it.
Another thing to consider with the two tunnel types is that a GRE tunnel has the ability to acknowledge the receipt of packets similar to TCP communications. The IPIP tunnel method has no such mechanism as it inherits the stateless behavior of a raw IP packet, similar to UDP based communications.
Steve
