The first option how to migrate to VDS is by NSX Manager GUI.
You can check the migration tool by navigating to System -> Quickstart -> (Prepare Hosts for Migration from N-VDS to VDS) Get Started:
After that you get to this screen:
There you would Run Pre Checks, address any inconsistencies (in N-VDS settings, so it can be moved to one VDS), and Create VDS.
This specific way (through the GUI) is supposed to be used in connection with vSphere Update Manager – by preparing the topology, you should go to vCenter and trigger ESXi host upgrade there. The migration will be completed as a part of the upgrade process. Mind the limitations – you cannot do that while updating inside the same version – just between versions (e.g. 7 U1 to 7U2).
I have tried this way of upgrade only in lab and from my experience I would not recommend it that much as it failed for some hosts (and took quite a while to complete) – did not dig that deep into why, could also be a problem of the nested environment, but some hosts did upgrade some did not, that doesn’t fill me with trust towards this form of migration. If you are only looking for migration to VDS, I would use other ways to perform it.