When the host is running low on memory it will attempt to use the ballooning driver in the guest vm's (installed via vmware tools), to force the guest vm's to release memory back to the host.
If the ballooning driver is unavailable (no vmware tools installed), or the ballooning driver is unable to grow any larger, the host will start paging the vm's to the swap file created in the vm's folder when a vm is started (meaning on the SAN).
vmware will use a combination of the two methods above, but prefer the first one.
