When using a 32bit processor, the maximum memory that you can have in your machine is 4GB.  Well, that isn’t totally true, because there are hacks to make your machine able to use more, but I won’t get too much into that.

To come up with the 4GB of maximum addressable memory, you need only to take 2^32 and you will get 4,294,967,296 / (1,024 x 1,024) = 4,096 megabytes = 4GB.

So, if your computer can really address 4GB of RAM, why then does it show far less available?  For instance, It might show 3454MB or any other number that could be far less than 4096MB. 

So where does the rest of that memory go? 

Ian Griffiths offers a detailed explanation as to why:

To address 4GB of memory you need 32 bits of address bus. (Assuming individual bytes are addressable.) This gives us a problem – the same problem that IBM faced when designing the original PC. You tend to want to have more than just memory in a computer – you need things like graphics cards and hard disks to be accessible to the computer in order for it to be able to use them. So just as the original PC had to carve up the 8086’s 1MB addressing range into memory (640K) and ‘other’ (384K), the same problem exists today if you want to fit memory and devices into a 32-bit address range: not all of the available 4GB of address space can be given over to memory.For a long time this wasn’t a problem, because there was a whole 4GB of address space, so devices typically lurk up in the top 1GB of physical address space, leaving the bottom 3GB for memory. And 3GB should be enough for anyone, right?

So what actually happens if you go out and buy 4GB of memory for your PC? Well, it’s just like the DOS days – there’s a hole in your memory map for the IO. (Now it’s only 25% of the total address space, but it’s still a big hole.) So the bottom 3GB of your memory will be available, but there’s an issue with that last 1GB.

The proper solution to this problem would be to use a 64-bit operating system. However, even with a 64-bit OS, you will have to make sure your motherboard supports using 4 GB or more of memory, as outlined in this Microsoft Knowledge Base article.

Although the performance benefits of 64-bit are not noticed too much on the desktop as yet, a 64-bit OS is necessary if your applications need to use more than 2 GB of memory.