Update: Per the VMware Storage Blog this behavior has changed for 5.
In vSphere 5.0, the workingDir parameter still exists, but it will no longer be used as a pointer to a location for storing snapshot delta disks. The workingDir setting will now only be used to determine the location for the snapshot data (.vmsn) file. The delta disks are now always stored in the same home folder as the base disk.
Original Article (and relevant for pre-vSphere5):
I’m not looking to reinvent the wheel, just point out a quirk or two that don’t get a lot of attention.
VMware ESX/ESXi stores virtual machine hard drives as .vmdk files. When you take a snapshot in VMware it stops writing changes to the current VMDK file and starts a new one. Since the new file only holds changes it is called a “delta file”
If you decide you like the new changes you can keep them (which writes all changes to the original vmdk) or discard them which deletes the new VMDK and sets you back to using the old one.
VMware stores the VMDK files by default in the same directory as the virtual machine’s configuration file. But you can also choose to store the VMDK on a different datastore, either during creation or later with storage vMotion or an offline migration.
However, by default the delata files are always stored with the vmx file. If you create a VM on “datastore1” and give it hard drives on “datastore2” and “datastore3” then take a snapshot you will stop writting changed to “datastore2” and “datastore3” and two “delta.vmdk” files will show up on “datastore1”
Keep this in mind if you are separating VMDKs for storage reasons. If you take snapshots you’ll be using space on the VMX’s datastore by default.
To change where snapshots are being stored (note that the change still leaves all snapshots for the VM in one location you cannot place snapshots on a VMDK by VMDK basis) see VMware KB1002929