You can see an explanation of the difference between application memory and flash memory (and how to determine application memory size) in my post a few posts above this one.

Do you know what the app to find out the application memory is called? I tried looking for "system monitoring" on itunes and it didn't come up with anything. I'm willing to try that, but right now I only have a few games on my ipod and none of the others are running while I'm trying to use VF. I don't even play other music while I'm playing VF, so I don't know that it's the application memory that is causing the problem. But I'm willing to try anything. TIA!

As I mentioned in my earlier post, in a 128 meg device that sees heavy usage, it's not unusual that there is not enough free application memory to run Virtual Families, which is our largest iPhone game. You would be surprised at how quickly application memory is consumed by the iPhone OS and other applications.

The two monitoring applications that I use in my work are iStat and System Activity Monitor. There are others, as well.