Number 1 is right!

Guni, 3) It can be both of 1), 2) that depends on context. memory......the ability to remember things memory.....something that you remembered 1) I have a bad memory......my memory doesn't function well. 2) I have a bad memory......I have an unpleasant memory of some past event. 1) Doctor - So, you are here because you have a bad memory? Patient - Yes doctor, I can't remember anything. In fact I have such a bad memory that I forgot why I came to see you! 2) Psychiatrist - Today we are going to discuss your childhood memories. Do you have a bad memory you would like to talk about? Patient - Yes, I have a bad memory--a very bad memory about my first day in school.

Thank you all for your attention!

What did you ask ? Why am I writing this answer ? I have a feeling like something should be written on this nice white paper sheet. Can't remember now, sorry, maybe later.

It depends on the context. Usually it means the first one.