It's basically a section of your hard drive that is used as RAM. This is especially useful for people that have a small amount of physical RAM. 3GB could be close to the limit, depending on the game you are playing.
To check what Windows has set your virtual memory too, right-click on Computer > Properties. On the right side, click Change Settings. Click on the Advanced tab. Under Performance, click Settings. Click the Advanced tab. Under Virtual Memory it should show a value. Currently mine is 3965 MB. If you go into Change... it will usually be set to Automatically manage. If so, that shouldn't be your problem.
This could be your problem. I read a forum post saying that the power saving feature that was introduced caused issues with Windows XP. That should have been fixed with Windows 7 but who knows. If you want to take a look, head here