Here is the explanation from the SLES11 SP1 release notes.
“Since VMWare and Novell and the community did improve the infrastructure in the kernel in a way that VMI is not necessary any more, starting with SUSE Linux Enterprise Server 11 SP1 the seperate VMI kernel flavor is now obsolete and therefore was dropped from the media. Upon upgrade it would be automatically replaced by the PAE kernel flavour, which assures customers can take advantage of all the features which were included in the separate VMI kernel flavour.”