First of all, how much free space do you actually have on the C drive?
Photoshop requires a considerable amount of free drive space on the hard disk that is designated as the Scratch drive, to write temporary files. Back up your data files, and then delete as many unneeded files and programs as you can.
Run CCleaner www.ccleaner.com
and PCdecrapifier www.pcdecrapifier.com
The larger your image(s) the more space Photoshop needs for working on them. Do you get the message when you open small images? The scratch drive space needs to be contiguous, so after you have deleted everything you can, defragment your hard drive.
You can assign a different hard drive as your scratch disk in Edit: Preferences: Performance – on a laptop this means using an external hard drive and your performance will slow down a lot. On a desktop machine, you can speed up Photoshop by installing another hard drive in the machine and using it for Photoshop scratch disk space. Adobe recommends that you use a different drive for scratch than your boot drive or the drive assigned to the OS (Windows, OSX) swap files.
graphicssoft.about.com/od/photoshop/f/scratchdisk.htm
www.easyelements.com/scratch-disk-is-full.html
kb2.adobe.com/cps/401/kb401088.html