Objective 1.1 - NPIV

From How NPIV-Based LUN Access Works:

SAN objects, such as switches, HBAs, storage devices, or virtual machines can be assigned World Wide Name (WWN) identifiers. WWNs uniquely identify such objects in the Fibre Channel fabric. When virtual machines have WWN assignments, they use them for all RDM traffic, so the LUNs pointed to by any of the RDMs on the virtual machine must not be masked against its WWNs. When virtual machines do not have WWN assignments, they access storage LUNs with the WWNs of their host’s physical HBAs. By using NPIV, however, a SAN administrator can monitor and route storage access on a per virtual machine basis. The following section describes how this works.

NPIV enables a single FC HBA port to register several unique WWNs with the fabric, each of which can be assigned to an individual virtual machine. When a virtual machine has a WWN assigned to it, the virtual machine’s configuration file (.vmx) is updated to include a WWN pair (consisting of a World Wide Port Name, WWPN, and a World Wide Node Name, WWNN). As that virtual machine is powered on, the VMkernel instantiates a virtual port (VPORT) on the physical HBA which is used to access the LUN. The VPORT is a virtual HBA that appears to the FC fabric as a physical HBA, that is, it has its own unique identifier, the WWN pair that was assigned to the virtual machine. Each VPORT is specific to the virtual machine, and the VPORT is destroyed on the host and it no longer appears to the FC fabric when the virtual machine is powered off.

If NPIV is enabled, four WWN pairs (WWPN & WWNN) are specified for each virtual machine at creation time.When a virtual machine using NPIV is powered on, it uses each of these WWN pairs in sequence to try to discover an access path to the storage. The number of VPORTs that are instantiated equals the number of physical HBAs present on the host up to the maximum of four. A VPORT is created on each physical HBA that a physical path is found on. Each physical path is used to determine the virtual path that will be used to access the LUN.Note that HBAs that are not NPIV-aware are skipped in this discovery process because VPORTs cannot be instantiated on them.

Note: If a user has four physical HBAs as paths to the storage, all physical paths must be zoned to the virtual machine by the SAN administrator. This is required to support multipathing even though only one path at a time will be active.

That's NPIV in a nutshell. For more detail and the requirements, read How to Configure NPIV on VMware vSphere 4.0.