Prepare your virtual machine:

sudo aptitude install build-essential linux-headers-$(uname -r)

In the Vmware Server Console click on “VM → Install VMware Tools” to mount the vmware tools as a cdrom. Then open a terminal session in the virtual machine and do the following:

cd /tmp
tar xzf /media/cdrom/VMwareTools*.tar.gz
cd vmware-tools-distrib
sudo ./vmware-install.pl

If the mouse wheel doesn't work within your VM, try the following:

Open a terminal window and type:

$ sudo vi /etc/X11/xorg.conf

Then find “InputDevice” section with Identifier “Configured Mouse” and change the Option “Protocol” from “ps/2” to “IMPS/2”

Restart X (Ctrl + Alt + Backspace)