Here’s a great article highlighting how IP hash based load balancing works as well as some of the limitations.
IP hash based load balancing can improve overall link utilization by dynamically calculating based on IP of the source and destination which NIC to use. Compared to standard port based load balancing which generally sees a VM tied to a single NIC for traffic this can really improve throughput and load distribution. Keep in mind that the physical switches need to be configured appropriately!
It also identifies some common limitations that need to be kept in mind:
ESX/ESXi supports IP hash teaming on a single physical switch only: This one can be a real deal-breaker for some. Because etherchannel bonding is usually only supported on a single switch, it may not be possible to distribute the uplinks across multiple physical switches for redundancy. There are some exceptions to this rule as some ‘stacked’ switches, or modular switches with a common backplane support etherchannel across physical switches or modules. Cisco’s VPC (virtual port channel) technology can also address this on supported switches. Consult with your hardware vendor for your options.
ESX/ESXi supports only 802.3ad link aggregation in ‘Static’ mode: This is also referred to as ‘Mode On’ in the Cisco world. This means that LACP (link aggregation control protocol) cannot be used. The only exception is with a vNetwork Distributed Switch in vSphere 5.1, and with the Cisco Nexus 1000V. If you are using vNetwork Standard Switches, you must use a static etherchannel.
Beacon Probing is not supported with IP hash: Only link status can be used as a failure detection method with an IP hash team. This may not be desirable in some situations.





