Strange ESXi Datastore settings

That's normal for thin provisioned, ESXi creates a small file but tells the VM that it is whatever size you pick. The VM is free to write data to it but once the physical datastore runs out of space the virtual disk goes read only unless you can expand the physical storage (by adding disks to an array for example).

Be careful of running defrag on the VM, as that shuffles the data on the virtual disk about ut starts to consume physical space very quickly.

But the Maximum size cannot be greater that the actual physical Datastore size.
In my case, the Physical size is 477 GB, the maximum size should be 477 GB.

It can be set to more than the physical size. Thin provisioning allows for the addition of extra physical space in the future so you can set the maximum size to greater than your current disk size, then in the future buy a bigger SSD and clone your old one to it, resize your datastore and then it is no longer larger than the physical size.

Thin provisioning is more useful with SANs and arrays of disks where more capacity can be added on the fly but it is still available with single physical disks.

I have checked all my VMs and it is impossible for any HD size to be larger than the physical size.
Would you please enforce your statement with a trusted url link..

You are right, it is meant to set that limit.