//This is where the drawing happens - RAM's usage is going up here very slowly
private void Form1_KeyPress(object sender, KeyPressEventArgs
{
            Pen pen = new Pen(Brushes.Red);

            using (Graphics g = Graphics.FromImage(panel.BackgroundImage))
            {
                g.DrawEllipse(pen, x, y, 50, 50);
        x += 20;
        y += 20;
            }

            panel.Refresh();
            pen.Dispose();
}

//However, this is the flood fill: every time I call that, RAM's usage is going up pretty fast: 1-1.5MB per each call
private void panel_Click(object sender, EventArgs e)
{
            var mouse = e as MouseEventArgs;

            Bitmap bitmap = new Bitmap(panel.Width, panel.Height);
            panel.DrawToBitmap(bitmap, new Rectangle(0, 0, panel.Width, panel.Height));
            panel.BackgroundImage.Dispose();

            FloodFill(bitmap, mouse.X, mouse.Y, Color.Red);

            panel.BackgroundImage = bitmap;
}

//And this is flood fill (probably irrelevant)
void FloodFill(Bitmap bitmap, int x, int y, Color color)
{
            BitmapData data = bitmap.LockBits(
                new Rectangle(0, 0, bitmap.Width, bitmap.Height),
                ImageLockMode.ReadWrite, PixelFormat.Format32bppArgb);
            int[] bits = new int[data.Stride / 4 * data.Height];
            Marshal.Copy(data.Scan0, bits, 0, bits.Length);

            LinkedList<Point> check = new LinkedList<Point>();
            int floodTo = color.ToArgb();
            int floodFrom = bits[x + y * data.Stride / 4];
            bits[x + y * data.Stride / 4] = floodTo;

            if (floodFrom != floodTo)
            {
                check.AddLast(new Point(x, y));
                while (check.Count > 0)
                {
                    Point cur = check.First.Value;
                    check.RemoveFirst();

                    foreach (Point off in new Point[] {
                new Point(0, -1), new Point(0, 1),
                new Point(-1, 0), new Point(1, 0)})
                    {
                        Point next = new Point(cur.X + off.X, cur.Y + off.Y);
                        if (next.X >= 0 && next.Y >= 0 &&
                            next.X < data.Width &&
                            next.Y < data.Height)
                        {
                            if (bits[next.X + next.Y * data.Stride / 4] == floodFrom)
                            {
                                check.AddLast(next);
                                bits[next.X + next.Y * data.Stride / 4] = floodTo;
                            }
                        }
                    }
                }
}