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Open vSwitch is a production quality, multilayer virtual switch licensed under the open source Apache 2.0 license. It is designed to enable massive network automation through programmatic extension, while still supporting standard management interfaces and protocols (e.g. NetFlow, sFlow, IPFIX, RSPAN, CLI, LACP, 802.1ag). In addition, it is designed to support distribution across multiple physical servers similar to VMware's vNetwork distributed vswitch or Cisco's Nexus 1000V. See full feature list here
To understand why virtualized environments require a new approach to switching, read the WHY-OVS document that is distributed with the source code.