Over the yeas there have been some controversy over this topic. Should vCenter Server be a physical or a virtual machine?
The most important aspect is that both solutions are supported by VMware.
For the virtual solution see also: Running VirtualCenter in a Virtual Machine - http://www.vmware.com/pdf/vi3_vc_in_vm.pdf
Note that in both cases minimum required must (or may) be guaranteed.
But it's also very important understand with VMware service require a working vCenter Server:
VMware HA require vCenter only for the initial setup
VMware VMotion and SVMotion require vCenter only to start the operation
VMware DRS/DPM can work only with vCenter
Template provisiong require vCenter
In addition, you will also need to know where your SQL server is located, cause if you loose DB connection, the vCenter Server service will stop!
For this reason in medium/small environment could be a good idea put the on the same server also the DBMS.
Physical solution: pro and cons
With VI 3.x the license server can work also if ESX are down... this coul be useful to power on the ESX and the VM
It is not susceptible to a potential VI outage
Most scalable, cause performance are limited only by server hardware
A dedicated physical server is required (it's not recommended mix it with VCB or other services)
Backup must be done using tradition tools
Difficult to manage a disaster recovery solution
Not easy solutions for Business Continuity
Virtual solution: pro and cons
You do not need a dedicated physical server (a way to reach a greater consolidation)
vCenter Server is just an "appliance" (for small/medium environment also the database part can be put together)
Faster to restore, you can use VMware HA to restart vCenter Server
Each backup solution that work for a VM work also in this case
Simple solutions for Business Continuity
If you have vMotion license you can move the VM to one host to another
In VI 3.x, if license server is on vCenter Server, you can have some big problems after 14 days of downtime (see http://www.riccardoriva.com/archives/703)
If you do not have VMotion license than you have to power-off vCenter Server to move between ESX (see VMotion section of How work without vCenter Server )
It is susceptible to a potential VI outage
It must contend for resources along with other VMs
Best Practices: running vCenter virtual (vSphere)
http://searchvirtualdatacentre.techtarget.co.uk/news/column/0,294698,sid203_gci1512874,00.html? - VMware best practices: Why virtualise vCenter?
For large envirnment, as suggested in the VMware vSphere: Design Workshop http://V4.x, a management cluster (with only 3 nodes) could be considered for vCenter Server and other management VM or VA (for example vMA). In this case most of the cons will not applied, because management and production clusters are using different hosts.
vCenter Performance as a VM
http://www.blueshiftblog.com/?p=1206 - Should You Virtualize vCenter Server (and everything else?)
http://www.vmware.com/resources/techresources/10162 - Performance of Virtualized SQL Server–Based VMware vCenter Database
P2V or V2P
The P2V conversion is very simple and can be managed by VMware Converter without problem.
The V2P conversion could be a little complicated. See: Moving Virtual Center from VM back to Physical
To move the SQL Server database see this KB:
http://kb.vmware.com/kb/7960893 - VMware Self-Service- Moving the VirtualCenter SQL Database