Does vacation time out of US counted while H1B VISA extension?

Yes, vacation time outside USA can be captured in your extension period, it seems you are close to 6 years time limit of your H-1b. You need send proof showing your vacation outside USA which could be I-94, stamps on the passport and any other documents showing travel.

Yes, any time out of the US is deducted from your H1b time.

Yes your employer can "recapture" time spent outside the U.S. when extending your H-1B status