Thin disk provisioning is a fully-supported feature in vSphere 4 that can save tons of storage space on your SAN by allowing virtual disks to consume storage space as needed instead all at once. Under the supervision of VMware vCenter Server, ESX 4 thin provisioning is safe and reliable even for production workloads thanks to advanced storage accounting and built-in monitoring.  And even if the worst does happen — an unexpectedly full datastore — recovery is simple.

Now that you are convinced that VMware vSphere thin provisioning has a place in your data center, you may be wondering about performance tradeoffs.

It turns out that thin disks perform just about as well as thick disks.

In this brand-new VMware vStorage Thin Provisioning performance study, VMware performance engineers compare thick and thin disk performance.  This must-read document covers several important topics, such as:

• I/O-intensive benchmarking with a 16-node ESX cluster
• File copy benchmarking with 2 ESX hosts
• Fragmentation impact
• Thin provisioning affect on co-located thick disks

Source: http://www.vcritical.com/2009/11/vsphere-thin-provisioned-disk-performance/