SQL Server creates dump files (files with a .mdmp extension) by default under the LOG folder.

These dump files are generally created when SQL Server encounters an exception or access violation. A dump file can also be forced manually. If you see these dump files, it might be good to contact SQL Server Support team to ensure everything is fine with your server.

At times, these dump files could be huge (2 GB or even more) and your LOG folder might be located on a disk drive that  doesnt have enough space left on it.

In SQL 2000, there was no way to change this default location for the dump files. However, in SQL 2005, you can change that through Configuraiton Manager.

Launch Configuration Manager from Configuration Tools menu. Double click on SQL Server (instancename) service and go to ADVANCED tab. There you can see the option for DUMP DIRECTORY.

Change that value to a location on a drive that has enough space and hit apply. The changes will be applied only after a restart.

However, this value will apply instance-wide. You will see the same value of the dump directory for SQL Server Agent and SQL Browser Service.

Also, this property is not exposed for SSIS and FTS.