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In the current version of the game vassals are merely vassals. I don't think there is Feudal Society. Occasionally they break out and establish themselves as an empire de facto. Sometimes Vassals form out of your own worlds where the population with different ethics become unhappy. I have seen this with continued high unrest. Vassals can only develop within their own empire range. Oddly enough in my current empire, which I have 7 vassals, only one has created an outpost outside or either our empires borders. You can give your own Vassals your own planets to artificially grow them, whilst easing the overexpansion on your research and unity generation. I'd love to be able to turn them into tributaries.