In simple words, Virtual Memory is system memory that is simulated by the operating system and it is placed on your hard drive. It combines your computer's RAM with temporary space on your disk. When your PC runs low on RAM, virtual memory moves data from RAM to a space called the paging file or swap file. Moving the data frees up your RAM and your applications can continue to run without crashes.
If you don't have too much RAM installed on your system it can be a good a idea to increase the size of your virtual memory. If you are like me, you might still want to configure the size of the swap/paging file or it's location, even if your PC has plenty of RAM available.

As you will see, configuring the virtual memory in Windows Vista is easy. Just follow these steps:
First, go to your Desktop and right click on Computer. From the right click menu select Properties.
Computer
In the System window, click on Advanced system settings.
Virtual Memory

The System Properties window will open directly at the Advanced tab. Go to the Performance section and click on the Settings button highlighted in the screenshot below.
Virtual Memory
In the Performance Options window you will see the current size of the swap/paging file. To configure it click on Change.

Virtual Memory
By default, Windows Vista manages the paging file size for all your drives. To change this, first you need to deselect the checkbox from the top.
Virtual Memory
You can customize the paging file size for each of your drives. By default, the paging file is placed on the "C:" drive and it's automatically managed by the system. If you want to use another partition, select "C:", check the No paging file option and click on Set.
Virtual Memory
Now you need Windows Vista to create the paging file on another partition. Click on the partition you prefer and then select Custom size or System managed size.

Virtual Memory
If you want to have a custom size paging file you will need to type the initial and the maximum size. For the initial size you should have a few hundred megabytes (usually something close to the amount of RAM installed) and for the maximum size approximately 2.5 - 3 times the size of your RAM.

Some enthusiasts recommended using a fixed size paging file (the same initial and maximum size). If you want to go for this approach the size should be 2.5 - 3 times the size of your RAM. Having a small paging file might affect the performance of your running applications, especially if you are working with applications that require lots of memory.
When you are done making all the necessary changes, click on OK. If you increased the size of the paging file, Windows Vista won't require a restart to apply the changes.

However, if you decreased the size or changed the location of the paging file you will need to restart your PC in order for the changes to take effect.


Source Site: Windows Vista for Beginners - Windows Vista tutorials
Source Article: How to configure the virtual memory in Vista