A GRE network is similar to a VXLAN network in that traffic from one instance to another is encapsulated and sent over a layer 3 network. A unique segmentation ID is used to differentiate traffic from other GRE networks. Rather than use UDP as the transport mechanism, GRE uses IP protocol 47. For various reasons, the use of GRE for encapsulating tenant network traffic has fallen out of favor now that VXLAN is supported by both Open vSwitch and Linux Bridge network agents.
More information on how GRE encapsulation works is described in RFC 2784 available at the following URL: https://tools.ietf.org/html/rfc2784
As of the Pike release of OpenStack, the Open vSwitch mechanism driver is the only commonly used driver that supports GRE.