Low memory messages

I am receiving an error message on a Compaq Deskpro 400 with 128mb of ram with two 1.99g partitions. The message is “There is not enough free memory to run this program. Quit one or more programs, and then try again.” Which may be followed by “The system is dangerously low on resources” which is always followed by the system locking up. There is 500md free space on the c partition, I have removed items from run services. Any suggestions?