Network communications between virtual machines that are connected to the same virtual network on the same ESXi host will not use the physical network. All of the network traffic between the virtual machines will remain on the host.
Keeping virtual machines that communicate with each other together on the same host will reduce the load on the physical network; for example, keeping a web frontend server, application server, and database server together on the same host will keep the traffic between the servers internal to the host.
If the VMware DRS is configured on a vSphere Cluster, DRS rules can be configured on the cluster to keep virtual machines together on the same host.
In the following screenshot, a Virtual Machine Affinity Rule has been created to keep two virtual machines together on the same host:
With DRS enabled, the virtual machines assigned to the DRS rule will be vMotioned to run on the same host.
Virtual machine anti-affinity rules (Separate Virtual Machines) can also be configured to ensure that virtual machines run on separate hosts. This can be used when service redundancy is provided by multiple virtual machines, such as with multiple virtual domain controllers. Keeping virtual machines separate will ensure that a host failure does not impact service redundancy.