I've got a Windows Server 2016 hosting 2 Hyper-V VM's. What would be the benefit of using the VM backup tool verus a single instance of the Windows backup tool on the host? Wouldn't the Windows backup tool capture both VMs and save me the issue of re-configuring the host in the case of a hardware failure?
VM edition will allow you to back up all VMs on that host and if you install just a regular version on the host it'll allow you to only perform backups on that machine, that's the main difference.
The software will be able to only perform image-backups of the host, but not the VMs on it. VM edition is preferable when you have several VMs and you want to back them up using 1 instance of the software instead of installing the application on each VM manually.