Virtual Memory
Most computers today have something like 32 or 64 megabytes of RAM available for the CPU to use Unfortunately, that amount of RAM is not enough to run all of the programs that most users expect to run at once. 
For example, if you load the operating system, an e-mail program, a Web browser and word processor into RAM simultaneously, 32 megabytes is not enough to hold it all. If there were no such thing as virtual memory, then once you filled up the available RAM your computer would have to say, "Sorry, you can not load any more applications. Please close another application to load a new one." With virtual memory, what the computer can do is look at RAM for areas that have not been used recently and copy them onto the hard disk. This frees up space in RAM to load the new application.

Because this copying happens automatically, you don't even know it is happening, and it makes your computer feel like is has unlimited RAM space even though it only has 32 megabytes installed. Because hard disk space is so much cheaper than RAM chips, it also has a nice economic benefit. 
Do not worry about the balloon...it is just letting you know that it is helping you out! It is your friend!