Virtual memory is when your PC uses an area of the hard disk (sometimes called a swap file or paging file) as though it was memory.
The advantage of this is that applications can have access to more memory than the amount of physical RAM in your system.
The disadvantage is that the virtual memory works at hard disk speed, not memory speed, and is therefore S L O W.
As a general rule of thumb, a healthy system should have a swap file of between one and two times the amount of physical RAM.
The message you are getting may indicate that you don't have enough physical RAM installed. For Windows 98 I would recommend 256 MB system RAM, no more, no less. For Windows 2000 and XP I would recommend a minimum of 512 MB.