To understand how NSX-T Data Center encapsulates and decapsulates traffic during host-to-host communication, we need to consider the core components involved in overlay networks. Transport Nodes are fundamental as they include hypervisors and other nodes that participate in the overlay. VXLAN tunnels are used to encapsulate Ethernet frames within IP packets for transmission across the network, facilitating host-to-host communication. Therefore, the correct components are Transport Nodes and VXLAN tunnel.