Your computer has specifc, very fast memory chips. They come in different sizes, and the more the better. They are much faster than hard drives. Applications run better, so on and so forth, graphics programs go amazingly faster, etc.
Virtual memory essentially takes a part of your hard drive and uses it as "memory." Its slow- like regular hard drive access. It is usually needed when your computer has insufficent actual memory. It was more popular in the early 90s when memory chips were still very expensive. Your hard drive stores data- programs, documents, whatever. Memory is quick, transient bits of information the computer finds relevant and wants to access quickly, often repeatedly. Virtual memory just mimics (badly) real memory by using a chunk of your hard drive as pseudo-memory.
I'm not sure what version of windows you are using, but (I'm more familiar with macs anyway), all of the earlier versions of windows had kooky memory setups that were a layover from the DOS days.
Expanding virtual memory shouldn't hurt anything, but its pretty darn slow.
A modern computer should have at least 256mb of real memory, that is really the bare minimum, 512mb is better, 1 gig + if you want your machine to be a smooth runner.
matt