XenServer uses physical interfaces (PIFs) and virtual interfaces (VIFs) to connect virtual machines to networks. There are different types of networks like private, external, and bonded networks. External networks connect VMs to the physical network through a bridge. The XenServer hypervisor handles VM traffic by forwarding packets to the virtual switch which determines the destination VIF and passes the packet to the VM. Management interfaces are used for controlling XenServer and live migrations. Bonds aggregate multiple NICs and VLANs segregate traffic using separate bridges.