RAM disk is the area of internal RAM where your files are stored. System RAM is the area of internal RAM where your programs are executed. The default on the 512K version is an even split. This is the best setting for most users. The 1 MB version default maximizes the allocation of system RAM and minimizes the RAM disk. Most users don't need more than 300k of system RAM and should reallocate in favor of the RAM disk.
You should expand your RAM disk if you have no more space to store files.
You should expand your System RAM if you don't have enough space to run your programs or your Lotus spreadsheet has the MEM indicator showing.