Why all the hype for installing lots of RAM when the system
I didn't read all of the responses, so bear with me here if I am repeating information that has already been mentioned.
How much memory you need really depends on what OS you are running, your computing style, and what kind of apps you will be running or work you will be doing.
If you are running windows, I would recommend using a tool like Process Explorer to monitor your memory usage.
The OS makes a huge difference. Linux is much more efficient at utilizing physical memory (RAM) over virtual memory (VM) than Windows is. VM can be a good thing, but the problem it is that it involves writing data from RAM onto your hard-disk. This is called paging. RAM is substantially faster than disk (I don't know the exact figures off the top of my head but I feel comfortable saying RAM is several hundred times faster than your typical non-raid disk). Windows seems to use much more VM. Additionally the version of windows and patches/service pack installed makes a big difference. Windows 2000 only uses about 96-128mb of ram. A clean install of Windows XP Pro with no service pack only uses about 128mb of ram, but install SP2 or 3 on XP and now the system uses 200-256mb of memory after booting. I don't run Vista personally, but I hear it uses quite a bit more ram than XP (so much so that NetBook manufacturers are still shipping XP due to it's smaller memory footprint). Vista memory usage may also depend on the edition of vista (i.e. Ultimate) and if you are running some of the more exotic features (i.e. Aero). Windows 7 is supposed to be much better in this respect, but I don't have firsthand experience.
The second thing is your computing style. How many processes are running on your machine after boot (I have 47 running while typing this, but I have several browser windows open and MS Outlook). Are you the type of person to have many applications running at once or do you only have a few running at once. The more apps you run at once, the more memory you need in order to avoid paging in windows.
Lastly you have the apps you need to run or work you need to do. My particular job (Software Developer) requires me to be able to run multiple instances of MS Visual Studio (VS) 2008 and NetBeans (Java IDE). Each instance of VS uses about 100-350mb of ram (depending on the project). NetBeans uses about 150mb of ram with no projects open, each project adds about 50-150mb of ram usage depending on the complexity and size of the project.
In addition to running these IDEs, I typically need to have MS Outlook, Anti-Virus/Firewall, multiple browsers (IE, FireFox, and Chrome), and some other misc apps running.
I originally had 2GB of memory in my laptop and found that my machine was regularly paging quite a bit to disk. This caused poor performance. I requested (and was granted) an upgrade to 4GB. This still made a huge difference. The machine pages much less and runs much faster.
I also want to mention a couple things.
1. While you may not currently use 4GB of memory now, the trend is for all software to continue to use more. So you may find yourself using more memory in a couple years.
2. Memory is cheap! Prices have dropped so much so quickly that it likely costs Dell LESS to install the 4GB of memory in your new machine than it did to install 3GB in your previous one.
3. I have heard that Windows 7 is the last 32-bit OS MS will ship, eliminating the 4GB memory limit.
I kind of see this question as being similar to "Why do you need more than one CPU core?" The answer is similar in both cases, you need to balance your need (based on OS, computing style, applications, and future requirements/expansion) vs price.
Right now memory is so cheap I wouldn't bother installing anything less than 4GB in a DDR2 system because the price difference between 2GB or less is so small. Similar case in a DDR3 system, there is such a small price difference between triple channel 3GB (3x1GB) and 6GB (3x2GB) that I wouldn't bother with anything less than 6GB.
CPUs are a different story. While 2 cores are pretty much standard on all CPUs anymore, there is a substantial price increase when moving up in CPU Mhz and Cores. My stance here is to figure out your budget for the CPU and then buy the highest rated CPU within your budget.
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