VMware Player - Bad at making your own VM's!
VMware Workstation - Brilliant at most things.
With Workstation, it supports Direct X 9, and whilst it may not be as good as running directly on your host, it is still pretty decent and the latest version of Workstation (7) they have refined it further and the graphics are very good.
As Alex said, Disk I/O is also bad compared to a physical machine, but this can be dealt with by putting all the VM's on their own drive (not partition on same drive).
Personally, I use VM's for everything, I love it and think it is one of the best technologies!
Your title was "What should I not use it for". The answer really is nothing if you don't mind a slight delay when compared to running something natively and high end games. Apart from that, nothing!
With a bit of warning - If you are doing domain stuff, be careful of Snapshots and time synchronising... apart from that, Virtualisation is great!
descent -> decent :) – Billy ONeal – 2011-02-01T03:33:37.627
@ Billy ONeal - Even a year and a bit later, still hurts :( - Thanks! – William Hilsum – 2011-02-01T09:50:39.550
In the later versions of VMware Player (eg what I'm using Jan/Feb 2011, the directX performance has been significantly improved. I'd use VMware for anything. – quickly_now – 2011-02-01T10:39:38.187
+1 Agreed, VMs are really useful. I use them a lot, as well. And allowing VMs to access the hard drive directly can increase performance dramatically. – alex – 2009-11-07T16:26:50.850