Virtual Memory is using hard drive space like RAM incase you need more RAM than you have.
A hard drive has an Arm that actually read the data (well actaully it's the heads at the end of the Arm...but the Arm positions the reader) and any given hard drive only has one Arm, so you can only be reading data from one place at a time.
Well if you have absolutely everything on a single physical drive, then if a game tries to read or write some data from one of it's data files, or when you load a program or whatever, then if you also try to do a virtual memory read you have two read (or writes), and you want both of them to go as quickly as possible (Virtual Memory and Game Data can both be needed in a game, and usually quickly!) well if you have both Game Data and Virtual memory on a single hard drive, then they have to fight over the Disk Arm.
If you put Virtual Memory on a separate disk, then it will use that Disk's Arm, and the Games can use it's own Arm. No fighting over Arms means both reads get done faster (the usual name for this is Disk Arm Contention if you care).
So I put Virtual Memory on my 30Gig disk along with things that aren't accessed frequently (like MP3s, downlaods, etc) so that way it for the most part is undisturbed, so I can load programs and play games and they get their own disk instead of having to fight with the Virtual Memory.
I hope you sort of understood all that. It's kind of a convoluted concept, but 2 disk arms = better average seek and throughput.
If you want more proof of this, the company I work for has 2.1 Terrabytes (2100 gigs) worth of 4 and 8 Gig Drives, to keep the number of disk arms high so we can have lots of independant reads happening at once. We refuse to use larger drives (yes we have hundreds of drives) because then yes you get lots of space but total throughput goes down because people fight over disk arms.
Now I don't recommend you use 5 8Gig drives or anything quite so extreme. But an extra drive for Virtual memory can be quite beneficial.