Advantages
- easy to get past the 2 TB disk limit. This was more of an issue in the past as you can get around this in ESXi 5.1 with a physical RDM
- required for official support with MS clustering - (see the support protocols section) - http://kb.vmware.com/kb/1037959
Disadvantages
- the backend storage network is exposed to a guest OS
- portability of the VM may be hindered - i.e. you have to make sure the destination host will allow for the VM to have all the network access it needs. That'll probably be the case, but it's more difficult to verify than if the storage is presented via ESXi.
- a snapshot of the VM also requires another snapshot of the iSCSI LUN that the guest OS accesses
- you need to configure multipathing with the guest OS