Hi James,
As Andre and Frank already mentioned we introduced the functionality of a unified vMotion in vSphere 5.1. This unified vMotion allows users to migrate a VM cross host and cross datastore simulatanously. In addition Storage vMotion is now capable of using the vMotion network to migrate data across to non-shared datastores.
For more detailed information I would recommend you to read the vSphere 5.1 vMotion deepdive: http://frankdenneman.nl/2012/09/07/vsphere-5-1-vmotion-deepdive/
Note that since vSphere 5.1 we enable all new functionality only in the web client. Using a vSphere client will not allow you to migrate the VM from a local datastore