1. Intel VT-x or AMD-V is required for running "Nested Virtualization" which supports nested 32-bit VMs

2. Intel EPT or AMD RVI is required for running nested 64-bit VMs.

A quick way to verify whether your CPU truly supports both Intel-VT+EPT or AMD-V+RVI, you can paste the following into a browser:  

https://[your-esxi-host-ip-address]/mob/?moid=ha-host&doPath=capability 

You will need to login with your root credentials and then look for the "nestedHVSupported" property and if it states false, it means you maybe able to install nested ESXi or other hypervisor, but you will not be able to run nested 64-bit VMs, only 32-bit VMs, assuming you have either Intel-VT or AMD-V support on your CPUs.

Physical Host Setup

The physical host running VMware ESXi 5 requires just a few configuration changes; here is a guide:

1. Install VMware ESXi 5 on a physical host and configure networking, storage, and other aspects as needed

2. for your VM Network which your nested vESXi will be located, configure a vSwitch and/or Port Group to have Promiscuous Mode enabled

Virtual VMware ESXi Machine (vESXi) Creation

Step 1 - Create a new Virtual Hardware 9 Virtual Machine using the new vSphere Web Client that's available with vCenter Server 5.1.

Step 2 - Select "Linux" as the guestOS Family and "Other Linux (64-bit)" as the guestOS Version.

Step 3 - During the customize hardware wizard, expand the "CPU" section and select "Hardware Virtualization" box to enable VHV.

Note: If this box is grayed out, it means that your physical CPU does not supported Intel VT-x + EPT or AMD-V + RVI which is required to run VHV OR that you are not using Virtual Hardware 9. If your CPU only supports Intel-VT or AMD-V, then you can still install nested ESXi, but you will only be able to run nested 32-bit VMs and not nested 64-bit VMs.

Step 4 - It is still recommended that you change the guestOS Version to VMware ESXi 5.x after you have created the VM shell, as there are some special settings that are applied automatically. Unfortunately with the new vSphere Web Client, you will not be able to modify the guestOS after creation, so you will need to use the C#(vSphere) Client OR manually go into the .VMX and update guestOS = "vmkernel5"

Now you are ready to install nested ESXi VMs as well as run nested 64-bit VMs within.

Nesting "Other" Hypervisors

For those of you who feel inclined to run other hypervisors such as Hyper-V, you can do so with latest release of ESXi 5.1. The process if very straight forward just like running nested ESXi host.

Step 1 - Create a Virtual Hardware 9 VM and select the appropriate guestOS. In this example, I selected Windows Server 2012 (64-bit) as the guestOS version.

Step 2 - Enable VHV under the CPU section if you wish to create and run nested 64-bit VMs under Hyper-V

Step 3 - You will need to add one additional .vmx parameter which tells the underlying guestOS (Hyper-V) that it is not running as a virtual guest which in fact it really is. The parameter is hypervisor.cpuid.v0 = FALSE