Multicast is a networking method that permits multiple nodes connecting to the same socket. It is similar to broadcasting, but more efficient. For our purposes, however, we only need to understand that multicast is a way to share a socket to more than one nodes. This permits not only two, but any number of VMs to join the same virtual network.
The address (interface) 224.0.0.1 corresponds to the built-in multicast address of the localhost loop back device. This address is analogous to 127.0.0.1, which is the built-in unicast address of the localhost loop back device.