VFD stands for Variable Frequency Drive. A 3-phase motor's speed is controlled not by the voltage sent to the motor, but by the frequency.
Examples:
60Hz = nameplate speed (1750RPM for a 4-pole motor).
30Hz = 1/2 nameplate speed.
In your case, the vendor is using a VFD to convert from single phase to 3-phase power. This works because a VFD takes in AC from the line, rectifies it into high-voltage DC, and then chops that DC up back into a synthesized AC waveform at whatever frequency is programmed. In your case, it'll probably be set to 60Hz, and will be used simply to convert single phase to 3-phase power.
You need the larger circuit because that power has to come from somewhere. For a given amperage, a 3-phase supply can deliver 1.73 times as much power as an equivalent single phase supply.
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