This fault occurs when DRS considers migrating a virtual machine to a host, but finds that the host is incompatible with the given virtual machine.
This might occur because the target host does not have access to the network or storage connection needed by the virtual machine. Another reason this fault occurs is if the target host has a CPU that differs sufficiently from the current host so that using vMotion amongst the hosts is not supported.
To avoid this, create clusters such that all hosts are configured consistently and vMotion is compatible amongst the hosts.
Another reason the host is incompatible with the virtual machine is that there is a required VM/Host DRS rule in place that instructs DRS to never place this virtual machine on this host.