The balloon driver is invoked when there is memory contension on the host.
Per this article:
http://blogs.vmware.com/kb/2011/03/a-beginners-guide-to-memory-reclamation-in-esxesxi.html
There are four different states namely, high, soft, hard and low. Page sharing is enabled by default. The memory state in which the host state is in determines if swapping or ballooning is to be employed.
In the high state no reclamation techniques are employed unless there is a virtual machine memory limit configured. In the soft state, ballooning is employed. In the hard state, both ballooning and swapping is used. During swapping, memory compression is also activated. In the low state, in addition to employing all memory reclamation techniques, execution of all virtual machines that consume more memory than their target memory allocations is blocked.