The answer to this question is a straightforward...it depends. It depends upon what you are using your computer for and what operating system you are using, to take the two most obvious factors. If you are using memory intensive photo editing programs or doing video editing all the time, and want to be able to run office applications, and surf the internet, and do email, all at once - well, then you may need a fair amount of memory. If you are a typical home user and mostly use your computer for email, surfing, a word processor or spreadsheet, and the occasional game, then you won't need quite as much. In terms of how it affects you, having the right amount of memory equals a faster computer.
Here's some general guidelines for the typical home user (note MB = Megabyte, Gig = Gigabyte or 1024 MB, the main unit in terms of which memory is sold is the MB; the higher the number, the more memory you have)
Windows 95 - Seems to be happy with 64 MB. Anything over doesn't get you much performance increase, but if you have anything less, You should seriously consider getting more memory. The benefit can be quite substantial.
Windows 98/Me - Seems to be happy with 128 MB. Works semi ok with 64 MB, but you will probably see a significant performance increase by going to 128 MB. Anything over 256 MB generally doesn't get you much.
Windows 2000 - At least 128 MB, and basically as much as you can throw at it. Seriously consider 256 MB or more if it's got a heavy demand on it.
Windows XP - Hard to say, but 256 MB minimum just to run the basic apps, and definitely works better with 512 MB, and almost certainly would work better with more. I recommend 1 Gig of Ram for XP.
It's been said that you can never have enough memory. :) That's my motto
Some good information from Crucial Technology
http://www.crucial.com/library/howmuch.asp
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