As the resources and guides are quite scattered around the Internet, here is sample project and guide for those who want to use Visual Studio Code for remote Python debugging on RaspberryPi Zero W: https://bitbucket.org/jIRI/rasp-pi-zerow-vscode/overview
Just follow readme.md (and do not forget to replace the <raspberry.pi.ip.address> with your Pi IP address in all relevant files).
Here you can see it in action: