What happens when the virtual machine which has vCenter goes down ?
Well if it goes down due to software issues it doesn't really matter whether it's installed on a physical or virtual machine. However, if the issue is caused by a hardware failure you are usually better off with a virtual machine, because you can either use HA to automatically restart the vCenter Server VM on another host or register it on another host and power it on manually (assuming you have shared storage in place).
What is the best action to install a vCenter, Physical or Virtual machines ?
The best practice is installing vCenter Server as a virtual machine. See the reasons I mentioned above.
Added to this, How vCenter communicates in BOTH the machines ?
Not exactly sure what you mean. vCenter Server communicates with the ESXi hosts over the network.
André
