Running out of space to place all those Applications you’ve downloaded and tried out on your iPhone or iPod Touch. Instead of using the small OS Partition which is where all the applications are saved, you can use the Media partition instead and continue on the installing spree.
Both the iPhone and the iPod touch include relatively limited space on the OS partition (the part of your iPhone’s memory that stores the operating system and associated files). It’s where Apple, by default, adds its factory-installed Applications but you can save space by installing your Apps on the Media partition instead (that’s the part of your your touch or phone that contains your iTunes musics and videos).
Read the full article and how-to on tuaw.com