iPhone VM is a new tweak available in Cydia that allows to free some iPhone memory by creating a swap file. iPhone VM 2 is providing similar functionality.
Here are the differences between the two: iPhone VM creates a 256MB swap file. While iPhone VM 2 creates a 64MB dynamic swap file that can become bigger if needed.
There are some users who still prefer the old iPhoneVM and others who are better with iPhone VM 2. The installation of iPhone VM 2 provides automatic uninstall for the previous version.
iPhone VM 2 can be installed in Cydia through this repository: http://repo.beyouriphone.com.