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By using trunking instead of using a physical router interface per VLAN, the number of required router interfaces can be reduced. Instead of a single physical interface on the router for each VLAN on the switch, one physical interface can be used, and the router can still route packets between the VLANs.
For frames that contain packets that the router routes between the two VLANs, the incoming frame is tagged by the switch with one VLAN ID, and the outgoing frame is tagged by the router with the other VLAN ID.
A subinterface is a logical subdivision of a physical interface. The router assigns each subinterface an IP address and assigns the subinterface to a single VLAN. The encapsulation command numbers the VLANs, which must match the configuration for VLAN IDs in the switch.
encapsulation dot1q 1 native is an interface subcommand that tells the router that the subinterface is associated with VLAN 1, but the native keyword tells the router not to use any 802.1Q headers with that subinterface.
Routers do not perform dynamic negotiation of trunking. A switch connected to a router interface must manually configure trunking. ie: switchport mode trunk/switchport trunk encapsulation dot1q.