Chapter 10 Install and System Administration for FortiOS 5.0 : VLANs : VLAN switching and routing
  
VLAN switching and routing
VLAN switching takes place on the OSI model layer-2, just like other network switching. VLAN routing takes place on the OSI model layer-3. The difference between them is that during VLAN switching, VLAN packets are simply forwarded to their destination. This is different from VLAN routing where devices can open the VLAN packets and change their VLAN ID tags to route the packets to a new destination.
See Also
VLANs
VLAN layer-2 switching
VLAN layer-3 routing