What you read about, most likely, is creating an ext2, ext3, or ext4 extended partition on your SDCARD. This will NOT work for the phones internal memory. Yes, creating an extended partition can erase any data already on the sdcard. If that is a concern, just backup your sdcard to your PC first.
There are too many different ways available for creating partitions on a SDCARD. I cannot say which is best. You can try Mini Partition Tool, it's for Windows. The user interface is a little difficult to understand tho. Just search for "Partition sdcard". You'll find what you're looking for.
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