Resize your Parallels drive, and make Windows like it
For those who have tried out or even purchased Parallels, odds are the first virtual machine you created was for Windows XP. I'm also willing to bet that you underestimated how large to create your virtual hard disk. If that's the case, then that clever chap Dan over at UNEASYsilence has put together an über-handy how-to on making some more elbow room for yourself.
Using a combination of the Parallels Image Tool and the GParted LiveCD you can, with little effort, add as much or as little space that you like to your Windows XP virtual hard disk. And since it's all virtual, you can test it out by making a 'backup' copy of your existing virtual hard disk just in case you run into trouble. (While you're over there, make sure to check out ToasterClone as well!)