I want to reiterate that vCenter reports on active memory, which is the memory that has been recently used. The guest OS reports used memory which is the memory allocated to all processes whether it is being accessed or not.
What this value means is that if the host were to swap out memory pages belonging to that VM it would first select pages that are not active. If this were to happen the impact on performance would be minimized (but not eliminated) because those pages are not actively used.
In other words it is a good indicator for right sizing your VMs. Mind you, you still have to take into account the minimum requirements for the OS and application, but the latter is often exaggerated by the application provider.