Availability Zone and Sets

 

An Availability Set is a logical grouping capability for isolating VM resources from each other when they're deployed. Azure makes sure that the VMs you place within an Availability Set run across multiple physical servers, compute racks, storage units, and network switches 

So assume that we have 3 racks, so now you are configuring your VM and choose Availability set, then the 2nd VM will be created in the 2nd rack or the 3rd rack out of the 3 racks. The reason for this is for example if the rack 1 goes down due to a power outage and a system failure happens on the 1st rack, you still have your another machine running the other rack. This is improving your HA.

When we talk about the fault domain, out of the 3 racks. If MS does patching or any kinds of upgrade on the base OS. You will still have your machine up and running on the other rack.

Availability Zone:

Similar orchestration happens in the Azure Region, when you opt availability zone instead of AV set, that time your VM is setup in a complete different zone which is not in the same facility. Your VM1 is setup in zone-1 and the 2nd VM is setup in zone-2. So in case the complete zone-1 is down your VM is still available in other zone-2. AV zone give you improved HA in comparison to AV sets.