Hi,
You can also store your VM's on NFS (we use that).
- one of the main requirements prior to 5.1 with VMotion was shared storage (whether it be indeed iSCSI, NFS or SAN) - it is possible now to vmotion from local storage on one host to another hosts local storage - http://www.vmware.com/products/datacenter-virtualization/vsphere/vmotion.html
Instructions
http://www.yellow-bricks.com/2012/09/05/vmotion-enhancement-vsphere-5-1/
You can store your VM's alternatively on local storage as well with no problem.