Identifying when memory is the problem
Both your host memory and VM memory can indicate that it is under pressure. But the main challenge to a VMware admin is how to determine that there is a memory performance issue.
There are a few things which a VMware admin should understand is that there could be a memory performance issue and those are:
Your host memory consumption is approaching your total host memory
Active memory in your host is approaching your total memory
Ballooning is occurring
Host swapping is occurring
Now, if you wonder what is Active memory here in relation to Consumed memory, let me tell you that Active Memory is the amount of memory that is actively used, as estimated by VMkernel based on recently touched memory pages. For a VM this is referred to the amount of guest "physical" memory actively used.
An ESXi host calculates Active memory by using the sum of all active metrics for all powered-on virtual machines plus vSphere services on the host.
There could be another side to it...