This differs from "Require enough RAM", which compares the memory installed in the host. This one uses the host's current memory usage as reported by vCenter, which changes by the minute and lags a little, so several VMs created at once can still land on the same host. A host whose memory usage is unknown does not qualify.
If no candidate host qualifies, a message is logged and placement is left to vCenter, as when no usable candidate host exists at all. It has no effect when an explicit host is given.
"Inherit" (the default) uses the setting of the vSphere cloud this belongs to; "Yes" or "No" overrides it for this one only.