Note: If a particular VM runs an application that is not VSS-aware; so basically there is no VSS writer for this application -- such as MySQL, VM Backup will not be able to leverage the Microsoft VSS technology and perform an application consistent backup for that application.
What is an Application Consistent Backup?
In order to run backups that are transactionally consistent for VMs that run VSS-aware applications, namely such as Microsoft SQL Server, Microsoft Exchange, Microsoft SharePoint, Microsoft Active Directory or Oracle, you must ensure that "Application Consistent" is enabled.
VM Backup will leverage the Microsoft VSS technology, which is responsible for quiescing such applications running on a particular VM and thereby triggering the VSS writers inside.
It's then up to the VSS writers to handle rest, which for instance for a database application it will start by flushing all of its memory and IO operations so that the database is completely consistent. Therefore the VSS writer would technically be putting the application in a state if the application was properly closed.
For instance, any application that needs transactional logs truncated, such as Exchange - ensure that the Application Consistent is enabled.
For VMware hosts that need logs truncated, you'll notice that an extra step is required. Ensure that the "Truncate Logs" option is enabled and it shows as 'Installed'.
How do I enable it?
From the left-hand side menu, you have an option called [VSS Settings]. From here, check the 'Application Consistent' option for those VMs that require it.