Previously within the Azure PaaS and IaaS environments, the auto-scaling of VM instances is done in a manner that replicates additional instances of a running VM.  If you have ‘N’ instances of a VM in a Cloud service scaling up means you now have N+X instances of the VMs (where X is the amount of VMs you increment by in a period of time).  In the IaaS VM world you would have to first pre-allocate VMs into an availability set, then shut them down. Once Azure was triggered (via metrics and threshold indicators to manage the attributes around a scale-out process) Azure would scale instances up (turn the VM on), or down (turn the VMs off). Each of these VMs used the same base image as those running in the availability set. 

This scaling only worked at the VM level. Other Azure resources, such as storage, were not part of that scaling operation.  With Azure VM Scale Sets you take a VM PLUS a set of related resources, and creates a base ‘stamp’ image.  You then create one or more instances of these resource sets while scaling out. Unlike single-instance VMs, you do not need to independently define and correlate network, storage and extension resources for individual VMs as the resources scale as a ‘set’ of resources.

Scale sets leverage Azure Resource Manager (ARM), with its efficient and parallel resource deployment model. With ARM templates, you are able to provision groups of related Azure resources with a JSON script file.   That means you can create a relationship between the VMs that need to scale out and other resources like NIC cards, VM extensions, storage, and any other Azure resource you want to include in the scaling process.  Using VM Scale Sets allows you to create and manage a group of identical VMs to correlate the creation of many independent resources.  For instance, the scale set you deploy could have multiple VMs behind an external load balancer with a public IP address with inbound NAT rules that allow you to connect to a specific instance for solving problems, and Azure storage accounts.  Just think how hard that would be to do that in a scaling situation without Scale Sets.

Right now you use resource group templates for Scale Sets.  Eventually you will be able to create Scale Sets directly from the Azure portal.