Robert -

I do not understand the purpose of this VM-FEX? Is it software, harware? Does it have anything to do with my 2248 FEX's?

VM-FEX in hardware.  The Palo VIC adaptor uses dynamic vNICs which get assigned directly to VMs.  This allows you to create port profiles in UCSM which have VLAN and QoS attributes assigned.

It's a similar concept to the 2248 FEXs in regard to how the interfaces are managed, but the 2200 FEXs are not involved in this respect here.  Just as a 2200 FEX's interfaces are managed by a parent N5K, a VM-FEX's (virtual) interfaces are managed by UCSM.

There is a good video series here which detail how to deploy VM-FEX, worth a watch.

http://infrastructureadventures.com/2011/09/29/deploying-cisco-ucs-vm-fex-for-vsphere-part-1concept/

Regards,

Robert

Is this something additional to purchase, or do my servers have it by default? How do I know if I have it if it is additional?

This doesnt seem like a performance boost when it comes to vm to vm on the same host communication.

Requires a couple things.

1. You'll need the Enterprise Plus license in VMware

2. Your blades need the Cisco M81KR VIC network adaptor

Everything else included with UCSM by default.

It may not give a performance boost for VM - VM communication, but you can easily set and assign QoS policies directly from UCSM for your VMs.  Greatly simplifies QoS configuration found on legacy switches.

Regards,

Robert