I'm no expert, but here's what I think...
Your Android phone has 3 "sections" of memory that don't overlap. You have your system memory, which is generally read-only unless you have "rooted" your phone. This is where all the pre-installed applications are, including things like the dialer, facebook app, and what-not. If you were to reset your phone, everything in this system memory would provide you a fresh starting point.
Then you have the internal user memory. This is where your apps go by default. And your settings and configuration and customizations. Also, if there's an update to the Facebook app or GMail, or whatever, it ends up here...essentially "hiding" the original base version of the application that lives in system memory. The things in system memory aren't replaced, so that if you reset your phone, everything goes back to the original versions. THIS is the memory you're running low on.
Lastly, there's the SD card. That's a free-for-all space. You can put what you want there for data. And many apps (like the camera) expect to be able to store their data and settings there.
At some point Android made it possible to move apps to the SD card, but only if the app was written to handle running from the SD card. (I think it was Android 2.2, but I don't remember.) So, you can save some space my going to Settings | Applications | Manage applications and choosing each downloaded app in turn. Then choose the button "Move to SD card". The app will be moved to the SD card, although usually it will still require the use of some internal phone memory.
So, to address the original poster's problem, you'd need to delete apps that you have downloaded. You can't delete pre-installed apps unless you root the phone. And even if you root the phone and remove those pre-installed apps, you'd be removing them from system memory, not 'user' memory, and it's the 'user' memory that you're running low on.
My Opitmus T-LG-509. shows also Low Storage Space as well as Text Message is Full. Both of these Alerts are incorrect. All text messages are deleted. Even my locked ones. Im not low on space...None of my Apps will update. Cannot text , Text messages can't come in or go out.. So how do I put everything on a SD Card. I cannot find that link. System Memory shows 199MB..with a red bar. Then in Accounts n Sync message shows "Sync is currently experiencing problems..What problems. Phone working great today till hour ago. I not add any apps etc..