When you create a snapshot it takes a copy of the virtual machine config file (.vmx), and then creates the disk snapshot files.

.vmx Virtual machine configuration
.vmdk Virtual disk
-flat-vmdk Disk that contains the data

The disk snapshot files are:
-0000#-delta.vmdk Snapshot differences file
-SnapshotName.vmsn Virtual machine configuration of a snapshot
-0000#.vmsd Dictionary for snapshots and associated disk

Each time a snapshot is taken all changes to the disk are written to a differences file.

When a snapshot is deleted all the changes are commited to the original disk.

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