External Instruments
An external instrument bus is an input (return) to your audio hardware, along with a MIDI connection via Nuendo and few additional settings.
External instrument busses are created in the Audio Connections window. All external instrument busses that you have created will appear on the VST Instrument pop-up menus and can be selected in the same way as any VST instrument plug-in.
If you select an external instrument, you play it via MIDI as usual (you have to create a MIDI device to play it) and the sound (synth audio output) will come in to the VST environment where you can apply processing, etc.