One of the first items of importance in the log file is the temporary folder. You'll see this reported as something like this (timings have been removed for clarity):
INFORM|FME Configuration: Temporary directory is `C:\DOCUME~1\xxxx\LOCALS~1\Temp'
You'll also see a line that shows the amount of disk space available in that directory:
INFORM|System Status: 37700MB of disk space available in the FME temporary directory
When FME runs a large, multi-dataset translation, it often requires a lot of temporary disk space. This is particularly true when running a Dataset Fanout, because there is no guarantee that the features will arrive at the fanout in a single dataset group. Therefore, FME has to write out all of the datasets to temporary storage, and then fan them out afterwards. So the amount of available disk space is important, but on a performance issue you might be more concerned about the speed of all this disk activity.
See Setting the Temporary Directory for tips.