What is Weblogic Cluster ?

A WebLogic Server cluster consists of multiple webLogic server instances running simultaneously and working together to provide increased scalability and reliability. A cluster appears to clients to be a single webLogic server instance. The server instances that constitute a cluster can run on the same machine, or be located on different machines. You can increase a cluster’s capacity by adding additional server instances to the cluster on an existing machine, or you can add machines to the cluster to host the incremental server instances. Each server instance in a cluster must run the same version of WebLogic Server.

Cluster is a logical set of multiple Weblogic Server instances running simultaneously across different geographies and working together to achieve  high availability and scalability.
Weblogic Server clusters support multiple algorithms for load balancing and failover: round-robin, weight-based, random, round-robin-affinity, weight-based-affinity, and random-affinity(By default, a Weblogic Server cluster will use the round-robin method)

What is Horizontal and vertical clustering?
There are two method of clustering Horizontal and Vertical.

Horizontal clustering :
involves running multiple Java application servers that are run on two or more separate physical machines. Horizontal scaling is more reliable than vertical scaling, since there are multiple machines involved in the cluster environment, as compared to only one machine.

Vertical Clustering:
however, consists of multiple java applications servers on a single physical machine.
with vertical scaling, the machine's processing power, cpu usage, JVM heap memory configurations are the main factors in deciding how many servers instances should be run on one machine.

Horizontal. Because if one physical machine failed it will runs on other physical machine.