Hi,
MPLS Layer 3 VPNs use a peer-to-peer VPN Model that leverages BGP to distribute VPN-related information. This peer-to-peer model allows Enterprise subscribers to "outsource" routing information to Service Providers, resulting in significant cost savings and a reduction in operational complexity for Enterprises. Service Providers can then offer value-added services like QoS and Traffic Engineering, enabling network convergence that encompasses voice, video and data. MPLS Layer 3 VPNs can be deployed with a MPLS TE and Fast Reroute to offer "Tight SLAs". QoS-based offerings vary from two to five classes of services.
In brief, MPLS Layer 3 VPN is a peer-to-peer VPN model.
http://www.cisco.com/en/US/products/ps6604/products_ios_protocol_group_home.html
Cisco IOS Multiprotocol Label Switching (MPLS) Layer 2 VPNs consolidate Layer 2 traffic such as Ethernet, Frame Relay, asynchronous transfer mode (ATM), High Level Data Link Control (HDLC), and Point-to-Point Protocol (PPP) over an IP/MPLS network. This support, especially for traditional Frame Relay and ATM networks, enables service providers to protect their investments by continuing to provide existing data and voice services while introducing new services and architectures. Service providers also benefit from cost savings in converging services and new service revenues from new, innovative IP services over the newly converged IP/MPLS network.
In brief, MPLS Layer 2 VPN is an overlay VPN model over MPLS backbone.
http://www.cisco.com/en/US/products/ps6603/products_ios_protocol_group_home.html
HTH,
Mohammed Mahmoud.
