Virtual memory is basically memory, simulated by the hard drive. It is stored in whats called Page File. You usually get that balloon telling you it is low when you are running alot of programs. To make this stop from happening most of the times, either physically increase your RAM by adding more modules, or manually increase the page file limit on your computer. This isnt as good as adding new RAM but it will help somewhat. Go into the control panel > System > Advanced > You will then see a box that says Performace with a Settings button. Click that and then you will see 3 tabs. Click the one that says Advanced. At the bottom you will see Virtual Memory , and a little bit lower you will see 'total paging size for all drives: ****MB' . Simply click change and make the maximum size a bit bigger. You will usually get the best performance if you double the size of physical RAM. However, if that size is already double your RAM, just increase it a little more, as long as you dont go above 4GB. To find out how much physical RAM you have, click Start, right click My Computer, and click Properties. It will then tell you how much you have with a few other details. Remember, virtual memory isnt as fast as physical RAM, so if your looking more into performance then add another 512MB or so.
Hope this helps.