If Enable Host Monitoring is selected, each host in the cluster is checked to ensure it is running. If a host failure occurs, virtual machines are restarted on another host. Host Monitoring is also required for the vSphere Fault Tolerance recovery process to work properly.
After you create a cluster, enable Host Monitoring so that VMware HA can monitor heartbeats sent by the VMware HA agent on each host in the cluster.
If you need to perform network maintenance that might trigger host isolation responses, VMware recommends that you first suspend VMware HA by disabling Host Monitoring. After the maintenance is complete, reenable Host Monitoring.
The Host Monitoring Status section is new to vSphere and is used to enable the exchange of heartbeats among hosts in the cluster. In VI3, hosts always exchanged heartbeats if HA was enabled, and if any network or host maintenance was being performed, HA could be triggered unnecessarily. The Enable Host Monitoring setting allows you to turn this on or off when needed. For HA to work, Host Monitoring must be enabled. If you are doing maintenance, you can temporarily disable it.
Refer:vSphere Documentation Center
http://searchitchannel.techtarget.com/feature/Enabling-VMware-HA-DRS-Advanced-vSphere-features
As per me, if HA monitoring is disabled & when VM monitoring is enabled, if GuesOS is not working, VM should be restarted on the same host. However, I will confirm this and come back here.