Here is a great article on TOE, and how it benefits iSCSI Traffic for VMware. But first the insert.
The development of TCP offload engines marks a significant advance for all TCP/IP based protocols, including iSCSI. Although TCP provides session integrity in potentially congested or unstable networks, it incurs significant processing overhead on the host CPU. Offloading this processing to a host Ethernet adapter frees host CPU cycles and enables much higher performance solutions.
Because block I/O transactions can generate sustained high volumes of TCP/IP exchanges, IP storage is a direct beneficiary of TOE technology. With the burden of TCP overhead removed from the host CPU, only iSCSI processing is required. The remaining challenge for CPU utilization is optimizing iSCSI handling so blocks of data can be served to the host more efficiently. With clever engineering, wire-speed performance can be achieved when running software iSCSI on an optimized TOE-accelerated network adapter.
Remember that not all network adapters support TOE nativly via ESXi, so check the Hardware Compatability List and make sure your adapter is fully supported. Read the full PDF here. Page 6 is where it starts to explain the benefits of TOE and iSCSI.