This refers to the 'memory_limit' setting in php.ini (the PHP configuration file). Without doing the sums, I'm guessing it's set to 128MB. This is on the small side for Moodle. You need to increase this and then re-start your server. Where it is and how you do that is probably a question for your server admin.
I would think that 512M is more reasonable.
I would think that 512M is more reasonable.