Lun masking is the way to present disks to hosts from the san side. The hosts will see luns (same has scsi devices to make it simple).
A lun can be use to create a datastore from the storage option under the configuration tab or do a "raw disk map" from the vm configuration window.
Multiple VMs need to have the same RDM set in their config to be able to see the same LUN. Same apply to .vmdk disks.
Back to lun masking....
you can use lun masking to assign a lun to a single Host (dedicated disk like the ESX boot partition) or to a group of hosts to share the lun (like a datastore or RDM to a vm with vmotion).