The text of the error message has most of the instructions you need to help with this problem.
First try reducing the Maximum RAM Cache size to 90% or lower. (The default is 60%.) It's a bad idea to let AE, or any app, max out the RAM.
You can try increasing the Maximum Memory Usage, though values over 200% aren't useful.
For both of those memory values, increment in small values, 10-20% at a time. Don't ask AE to use more RAM than necessary; bad things like fragmentation and swapping start to occur.
Also, try the options under the Edit > Purge menu when you see this type of problem. You'll lose your existing RAM previews, but it will free up memory, which may indeed be fragmented.
It looks like you are running widows Vista. Vista is a memory pig and using AE with only 2gb of ram in Vista can lead to such problems. On top of Tim recommendation, I recommand you to upgrade to at least 4gb of ram.