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From the VMware Security Blog: Keeping Your VMotion Traffic Secure.

Recently a researcher published a proof-of-concept called
Xensploit which allows an attacker to view or manipulate a VM undergoing live
migration (i.e. VMware’s VMotion) from one server to
another. This was shown to work with
both VMware’s and Xen’s version of live migration. Although impressive, this work by no means
represents any new security risk in the datacenter. It should be emphasized this proof-of-concept
does NOT “take over the hypervisor” nor present
unencrypted traffic as a vulnerability needing patching, as some news
reports incorrectly assert. Rather, it a
reminder of how an already-compromised network, if left unchecked, could be
used to stage additional severe attacks in any environment, virtual or
physical. …

Encryption of all data-in-transit is certainly one well-understood mitigation
for man-in-the-middle attacks.  But the fact
that plenty of data flows unencrypted within the enterprise – indeed perhaps
the majority of data – suggests that there are other adequate mitigations. Unencrypted VMotion traffic is not a flaw,
but allowing VMotion to occur on a compromised network can be. So this is a good time to re-emphasize hardening best practices for VMware
Infrastructure and what benefit they serve in this scenario.