Hi Aswin,
The functionality remains the same but behind the scenes, something is different. Imagine you have 100 BGP neighbors…they all have the same configuration. Without peer groups, the router will have to generate an update for each neighbor, one-by-one.
With peer groups, the update is generated only once for the peer group. For each neighbor, we only have to replicate the update…that’s it. That saves some CPU cycles on the router.
I have to say that most routers also support BGP Dynamic Update Peer-Groups. This means that routers will automatically try to replicate packets “behind the scenes” for each neighbor, even when you are not using peer groups. Peer groups are still useful since they simplify your configuration.
Rene