Before reading this you may find the following tutorial useful:
Laser Basics
Conventional lasers are known as “edge emitters” because their laser light comes out from the edges. Also, their laser cavities run horizontally along their length. A vertical cavity surface emitting laser (VCSEL — pronounced "vixel"), however, gives out laser light from its surface and has a laser cavity that is vertical; hence the name.
The principles involved in the operation of a VCSEL are very similar to those of regular lasers. Again, there are two special semiconductor materials sandwiching an active layer where all the action takes place. But rather than reflective ends, in a VCSEL there are several layers of partially reflective mirrors above and below the active layer. Layers of semiconductor with differing compositions create these mirrors, and each mirror reflects a narrow range of wavelengths back into the cavity in order to cause light emission at just one wavelength.

VCSELs have several advantages over edge-emitting lasers. When manufacturing edge emitters, they need to be cut out of the material they are formed on before being packaged for testing. This stage of packaging is quite an expensive process, and if the laser then fails tests it has been wasted effort. Because VCSELs give out light from their surface, they can be tested while they are still on the “wafer” that they were made on, which is a considerable cost saving. VCSELs are also more efficient than edge emitters and give out more light for the same electric current applied to them (they have a lower “threshold current”). Additionally, the light beam from VCSELs is narrower and more circular, making it easier to get the light into an optical fiber.
The current problem with VCSELs is that they cannot yet give out the same maximum optical power as edge emitters. Also, mass-produced VCSELs at the desirable wavelength of 1550 nanometers (the wavelength of lowest loss in optical fibers) are not yet available. Low-power VCSELs at 850nm are widely used for short-distance networks, but high-power 1550nm products will be needed for widespread use in large-scale optical networks. Some proposals for 1550nm VCSELs also need the exciting of electrons to be done by the light from another laser (“optical excitation”) rather than just by electrical current (“electrical excitation”), which is another undesirable feature. Once these problems are solved, however, the cost benefits may result in VCSELs being used far more widely.
Key Points
VCSELs have vertical laser cavities and emit light vertically from their surface
Layers of partially reflective mirrors above and below cavity confine the light
More efficient than edge emitters, cheaper to test, and easier to get light into fibers
Currently only low powers and not mass produced at 1550nm
Further Reading
Distributed Feedback (DFB) Lasers, Tunable Lasers