I am importing VMWare images to create new virtual machines. I always choose Thick Provisioned format because I doubt there could be performance hit if I use thick provisioned format. If I use thin provisioned format, could it affect the performance in a great margin?
Thick provisioned disks is the 'default' and gives best performance but is obviously less space efficient.
Thin disks need to grow with the VM but reads and writes to already-allocated blocks within the disk work at the same speed as on thick disks; i.e. a thin disk that's not growing is the same speed as a thick disk.
What does slow the host and guest/s down is the process of file growth as this has to be handled properly before the load on the host and guest/s is complete. So if you have a VM that's very frequently growing its thin disk then yes you'll see quite a lot of write performance drops and read ones too if you're doing interleaved writes and reads.
In this situation using thick disks makes more sense but for the majority of guests that may grow periodically it often makes a lot of sense to use thin disks and take the, relatively minor, performance hit on growths. If consistent performance is more of an issue then stay with thick.
Essentially, if you're using ESX4 - performance won't be affected in any noticeable way. Different if you're using an earlier version...
In ESX 3.x, the use of thin virtual disks in production may result in performance degradation since disk space for the thin disks is allocated as the disks grow and the disk space is likely not contiguous. In ESX 4.0, thin virtual disks are fully supported in production environments. You can specify whether you want create a thin or thick disk when creating virtual machines or adding disks to existing virtual machines.