Final answer:
The Contrail vRouter component is responsible for packet forwarding for virtual machines, operating at the hypervisor level to route traffic efficiently.
Step-by-step explanation:
The component of Contrail that handles packet forwarding for virtual machines is called the vRouter or virtual router. The vRouter operates at the hypervisor level and is responsible for forwarding packets between different virtual machines on the same host, as well as to external networks through physical interfaces. It plays a critical role in the Contrail architecture by ensuring network traffic is efficiently routed and by providing advanced networking features such as security group, policy management, and network address translation (NAT).