I had this question twice this week and did a quick search on my blog and I wrote an article about it a while back, but I figured it wouldn’t hurt to repeat some of that and expand on it. I copied / pasted this from part from our book as I think it it spot on!
VM/App monitoring uses a heartbeat mechanism kind of similar to HA. If heartbeats, and, in this case, VMware Tools heartbeats, are not received for a specific (and configurable) amount of time, the virtual machine will be restarted. These heartbeats are monitored by the HA agent and are not sent over a network, but stay local to the host.
Although the heartbeat produced by VMware Tools is reliable, VMware added a further verification mechanism. To avoid false positives, VM Monitoring also monitors I/O activity of the virtual machine. When heartbeats are not received AND no disk or network activity has occurred over the last 120 seconds, per default, the virtual machine will be reset. Changing the advanced setting “das.iostatsInterval” can modify this 120-second interval.