When you run an Application(software program), then the temporary components required are stored as a virtual memory in RAM.
Depending on the amount of RAM you have, allows you to do Multitasking.
For general a purpose a 2GB Ram is enough. But if you are into Gaming, Video Editing or other 3D Animation Package...you might consider going up than 2GB.
Anyway the System Requirement(or RAM requirement) is clearly mentioned in any Software Package available. You just need to calculate if you need to run programs simultaneously.
1GB=1024Mb
1MB=1024Kb
Gb=Gigabyte>Mb=Megabyte>Kb=Kilobyte
One more thing Before considering an upgrade, know which one would go with your Hardware. Like the different Generations(DDR I or DDR II or DDR III)...and how much Mhz(speed) would your mother board support. And most importantly do you have available slots on your Mother Board.
Hope this gives you an Idea.
FOr more Depth Info you can always do a wikipedia search