Internally file space utilization is different but from host OS the VHD size looke the same.

There are two identical VMs, only that one has 1GB ram & the other is running with 2GB.

When looking through the explorer the C:\ contains the page file, for vm1 its 1 GB & on vm2 its 2 GB but on the HOST OS the VHD size is same !!

How is that possible?

Is it something like unless the page file is utilized internally the VHD won't expand & show that space ?

yup