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Question:

On the similar physical host which remains separate, what component ensures network traffic between virtual machines?

A Virtual NIC
Explaination

There will be one or more Virtual Network Interface Cards for each virtual host (NIC). This Virtual NICs are used to route traffic to each virtual host instead of routing it to all of the server's hosts. This is significant since cloud providers often host multiple customers' virtual servers on the similar physical disk (Resource Pooling).