Error while blending some images into a panoramic picture with Photoshop CS3

Hello,
When trying to blend some images into a panoramic picture with Photoshop CS3, I get an error message like "scratch disks are full" and therefore, the panoramic picture cannot be done.
My question is what are scratch disks? My computer is old and I realize, it is limited in RAM and clock speed.
I have a 40 Gb HD with about 6 GB of free space (the 31 Gb used are software and updates).
Thanks to all in advance for clarifying this issue for me.
