For communicating between VMs, what is the difference between the 'Custom' and 'LAN Segments' networking options in VMWare 8?
The documentation is not clear.
Does one of them have any advantage over the other? If not, why do they exist?
Only if you plan to use VLAN, or Cluster VMs.
LAN Segments can be use to create Teaming between Network Adapters, or just to create private LANs inside of a group of VMs.
Take a look some article regarding both, and how to implement
Hope this can help