i believe applications can only be installed onto the phones internal memory at the moment, if you have too many applications, then you may have filled up your internal memory..
I have a 4GB card in my g1, but despite that, I still don't have enough memory. How come? There is a message on my phone telling me "low space".
4GB MEMORY CARD?
My G1 came with an 8gb class 2 memory card but I soon replaced this with an 8gb class 6. only $9.99 on ebay.
Its because the droid apps are stored to your phone.
Not to the SD card. =( I found this out the hard way. My phone reset itself because it was so full. So the G1 is only built to hold 30 to 40 apps. Your multimedia goes to your SD card. Hope they change that un the future.
Bookmarks