Searching on the web, I figured that you have a Huawei Ascend Y, (aka H866C, which is what your signature says). According to the specs, it has 256 MB of RAM, and 120 MB ROM. The way Android handles memory can be very confusing, which can also make it very confusing to figure out what a phone's specs mean.
The 256 MB of RAM is the memory that your phone uses to keep apps active. The more the RAM, the more apps Android can keep active, and therefore the faster the phone performs. 256 MB is fairly low, but I don't think this is why you're getting the low phone storage alert. I think that is because of the 120 MB of ROM that's listed in the specs, which I believe corresponds to the phone's internal storage. This is not much at all, compared with most midrange phones that have at least 4-8 GB of internal storage. Some of your 120 MB is actually taken up by the system, so the internal storage you actually have available to you appears to be a paltry 42 MB or so. I'm sorry to say that you can't do much with that.
You might be able to move apps to the external SD card, which is the physical SD card you can insert, but this generally can't be done any more with more recent Android versions like ICS and Jellybean. If you have Gingerbread (2.3), it might be possible.
If possible, post a screenshot of your memory usage in the Settings menu. If you're unable to take a screenshot, try just taking a photo of the screen.
Sent from my ASUS Transformer Pad TF300T using Android Central Forums