An important fact: If you do not install the VMware Tools, the vmmemctl (balloon) driver will not be installed, and ballooning will not be possible. ESXi has 4 memory management techniques:
1) Transparent page sharing: Eliminates redundant copies of memory pages by removing them from memory and creating a reference instead.
2) Memory ballooning: In times of contention, the balloon driver (comes with VMware Tools) will ask the guest OS for unused memory and returns this back to vSphere
3) Memory compression: After ballooning runs out, try compressing the memory (basically gzipping it).
4) Swap to disk / host cache: Swap memory to a disk of some sort.
So, without the VMware tools (vmmemctl) balloon driver installed, we will only have 3 memory management techniques. It skips ballooning and goes straight to compression.