Does VPN connection on virtual machine bypass host VPN?

the vm traffic does not go through the host VPN. what the VM does is creating a virtual nic, so the vpn software on host looks away from that nic. it's exactly the same has having two nic cards and telling the vpn to use the interface/ip from card X. actually it's just that case, only one card is physical, the other virtual :)

you can test it another way: on a laptop or some host with 2 cards(say, one rj45, one wifi), setup your vpn, point it to one of the interfaces, and check traffic on both networks(a traceroute to somewhere will do fine)

adding a vm, from the host point of view, is just another nic( rj45, wifi, VM). if you want that interface to go through vpn, you have to tell the vpn client installed on host.

this is an old trick (as old as VMs, that is :) to use in walled networks such as work ;)
as in:
-pointy haired boss: i wanna you setup this crappy vpn so we can big brother you all day, da!!
-dilbertian slave: sure boss. i need some specialized virtual environments to test conditions of this space rocket fuel, is it ok to install a VM? (goes away and setups VM while p.h.b. scratches head. spends all day on the net)

only note i can remember, is i use vmware a lot, and virtual box has a different way to setup the virtual nics. on vmware, works out of the box.