To connect two VNets or more together, VNet peering can be used. However, I noticed that in my organization, some are using NSGs to whitelist IP addresses between VNets. Is there an advantage or best practices regarding that?
When to choose IP Whitelisting over VNet peering?
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Whitelisting IPs is usually not recommended when you can avoid doing so, following Zero Trust pattern.
Depending on your constraints and organization rules, you might want to leverage VNet Peering with a Hub-and-Spoke topology (or not) or even Private Link across VNets/regions for PaaS (or VMs behind a Load Balancer) to make sure traffic is flowing via the Microsoft backbone and not via the Internet, IP spoofing being a common attack.
I would always refer to the Microsoft Well-Architected Framework for such questions.