This article provides information about preserving the VMFS datastore option while upgrading or installing an ESXi host.
During the ESXi upgrade, if 'preserve VMFS' is not chosen, then installer will clear the current installation of ESXi as well as the VMFS datastore; then cleanly install the new version. If there are any VMs running on the same VMFS volume it will result in data loss.
Upgrade ESXi, preserve VMFS datastore : Update the current installation of VMware ESXi while keeping current settings and also keeping the VMFS datastore.
Install ESXi, overwrite VMFS datastore : Clear the current installation of VMware ESXi as well as the VMFS datastore; then cleanly install the new version of VMware ESXi.