Protocol Independent Multicast (PIM) is used to ensure that all switches for the multicast groups can advertise their existence and learn about other VTEPs in a VXLAN environment. PIM is designed to efficiently route multicast packets, making it the right protocol for managing multicast traffic in VXLAN.

Layer 2 data must be encapsulated when traversing an IP network because the IP network operates at Layer 3, which does not natively support Layer 2 frames. Encapsulation methods like VXLAN, GRE, or MPLS allow these Layer 2 frames to be transmitted over a Layer 3 IP network. This encapsulation is necessary to maintain the integrity and delivery of Layer 2 data between data centers.

In a data center environment where VMs and hosts are frequently moved, technologies that provide efficient traffic management and minimize unnecessary data paths are crucial. VXLAN (Virtual Extensible LAN) helps in creating a scalable network architecture, enabling layer 2 segments to span multiple locations over a layer 3 network. EVPN (Ethernet VPN) provides advanced control over the VXLAN gateway for improved routing efficiency and mobility. Together, VXLAN and EVPN enable efficient traffic flows and seamless VM mobility, making them a suitable solution for the scenario described.