Don't know how to find virtual hard disk image

Hello,

First let me say I've not had to deal with any technical aspects of a computer for more than ten years so the last three months of getting set up on a Mac (have been on a PC for 10 years) and having to set up a virtual machine (that was a real mind bender, since I have enough trouble understanding real machines) to work on new BIM software (when I've been a straight CAD person all these years) ... all of this has been very stressful and only recently starting to be kind of fun. So here's my dilemma. I need more virtual hard disk space for my design software because when I first set it up I didn't give myself nearly enough. I read an older post on how to do this from which I understand that you actually add another virtual HD, which isn't ideal, because I'd really like to have all my Autodesk software in the same place not split between to drives, but oh well, if anyone has any suggestions about that I'd appreciate hearing them.

Am using Parallels 5 on a Mac OS X 10.6.3 for a Windows 7 VM
So I started to go through the steps and immediately got confused.
I went to Mac OS --> Parallels --> Parallels Image Tool.app --> clicked on that and the first window looked good because the first item said it would help me "Increase the capacity of your virtual hard disks" --> clicked continue --> then in the next window it wanted me to "Specify the path to your virtual hard disk image file" !

Wowwa! What's a "virtual hard disk image file"! What's an "image file" for that matter! What would it look like? Does it have some kind of extension so I know it's what I'm looking for? I have no idea where it would be or what it would look like if I found it?

Could somebody help me with this? I feel like an idiot. I'm sure it's very basic but if somebody could walk me through this like they are talking to a 3 year old, I'd really appreciate it!

Also, is there a maximum size that that a virtual hard drive can be? Could I make a 100GB virtual HD? Is there a typical size for these things?

Cheers,
K.