IP split horizon checking is disabled by default for Frame Relay encapsulation so routing updates will come in and out the same interface. The routers learn the data-link connection identifiers (DLCIs) they need to use from the Frame Relay switch via Local Management Interface (LMI) updates. The routers then use Inverse ARP for the remote IP address and create a mapping of local DLCIs and their associated remote IP addresses. Additionally, certain protocols such as AppleTalk, transparent bridging, and IPX cannot be supported on partially meshed networks because they require "split horizon," in which a packet received on an interface cannot be transmitted out the same interface, even if the packet is received and transmitted on different virtual circuits. Configuring Frame Relay subinterfaces ensures that a single physical interface is treated as multiple virtual interfaces. This capability allows us to overcome split horizon rules. Packets received on one virtual interface can now be forwarded out another virtual interface, even if they are configured on the same physical interface.
http://www.cisco.com/en/US/tech/tk826/tk365/technologies_tech_note09186a0080093fdd.shtml
http://www.cisco.com/en/US/products/sw/iosswrel/ps1828/products_configuration_guide_chapter09186a00800ca569.html#4863
http://www.cisco.com/en/US/tech/tk713/tk237/technologies_tech_note09186a00800942ab.shtml
Nilesh
