Virtual Memory

Here's what M$ have to say about Virtual Memory:

Windows uses a dynamic virtual memory manager to handle swap file duties.

In order to provide more memory to applications than is physically present in the computer in the form of RAM, Windows uses hard disk space to simulate RAM. The amount of RAM in the computer plus the size of the paging file (also known as the swap file) equals the total physical memory, or virtual memory, size. Windows uses a dynamic paging file that remains at a size of 0K until it is needed. The paging file can grow to use all the available space on the hard disk if it is necessary. This is the default setting for the paging file. You should use this setting if possible.

 
Virtual Memory would have to be one of the most important Windows options to tweak for optimal performance. Although at the same time it can make or brake a system in terms of compatibility and stability. Many people have their own opinions on Virtual Memory. People with system memory greater then 256mb, VM (Virtual Memory) is hardly needed as Windows will hardly even use that much memory as it is. I'd suggest to people with 128mb RAM they use 64mb Minimum and Maximum VM and people with 64MB RAM use 32mb Minimum and Maximum VM and so on. Whatever you do, DO NOT disable Virtual Memory (heh, unless you have a gig of RAM). To change Virtual Memory settings, click Start, Settings, Control Panel, System, then click the Performance tab then Virtual Memory, you'll be greeted with a screen similar to the one below...

The advantage of setting your Maximum and Minimum VM to the same value will mean Windows spends less time changing VM cache sizes. Setting VM up really high will make games and CAD programs sluggish... Although there is an advantage of setting the Maximum VM to 300mb... You'll never have to worry about running low on VM.