You need to install a lot more RAM memory.
4 GBs of RAM is just enough RAM to run OS X alone, by itself, to insure efficient operation.
Start running other apps alongside OS X and your iMac is going to experience various degrees of slow downs.
Photoshop, and all Adobe apps, in general, needs a fast CPU and scads of RAM and hard drive space ( scratch disk space and a decent amount of video RAM.
What are the specs of your iMac so I better advise how much additonal RAM your iMac can take.
Year, screen size, CPU speed of your iMac
The internal is running slow. It seems to be indexing itself. This is a 24", early 2008 3.06 Ghz Intel Core 2 duo running lion 10.7.5. The internal is a 2TB seagate with 1.3 TB available. The external is a 160 GB USB that I have set up as an emergency boot drive. All it has on it is the system ( Lion 10.7.5 on both)
Everything was normal until I saved this 1.5 GB tiff file to the desktop. When I realized what I had done and tried to move it to a folder on the hard drive everything went bad.
I believe that 4 GB is the most this machine will take and I've never had any trouble running photoshop.
I suppose it could be a coincidence that this all happened right as I put this large file on the desktop, but it sure doesn't seem like it.
Any ideas would be greatly appreciated, David
Your iMac can take up to 6 GBs of RAM.
Maximum Memory 6.0 GB (Actual) 4.0 GB (Apple) Memory Slots 2 - 200-pin PC2-6400 (800MHz) DDR2 SO-DIMM
If you just recently upgraded to OS X 10.7 Lion, newer versions of OS X use a lot more CPU, GPU, RAM and hard drive resources.
4 GBs of RAM simply isn't enough.
The Application Memory error you were getting is telling you that your iMac does not have enough Internal RAM resources to run additonal Appications.
What version of Phoroshop is this?
Having this file of your desktop probably did slow down things.
And if you were working on this in Photoshop, a 1.5 GB PS file really turns into about 3 times that size when you open it and start working on it from within PS.
How much space is left on the external drive?
In PS Preferences you can setup scratch disks for PS to use for storing temp data when working with PS files.
You could set your primary scratch disk for the external drive and set a secondary scratch disk as your internal drive.
This can help to speed up both PS and iMac somewhat when working with PS files.
You can purchase reliable Mac RAM from online Mac RAM vendors Crucial memory or OWC(macsales).
Thanks all for the suggestions.
The best I could do to solve this was move all my files off the internal boot drive while running from the external emergency boot drive. Then, I reformatted the internal and reinstalled lion from the apple servers. ( I let it run overnight) Now I'm reinstalling programs and files, and it's working fine, just an unfortunate waste of time.
Lesson learned: Pay close attention to where files are being saved to. Don't let any big file save to the desktop.