RAM or Memory as it is commonly referred to is the part of your computer which is responsible for storing programs and files that are currently open and running on your system.
RAM is temporary only and gets wiped when you switch off a PC, it should not be confused with your hard drive which is permanent storage for your files, folders and programs.
When you open a program all the files needed to operate it are copied from your hard drive into RAM, RAM operates far quicker than a hard drive can.
If your RAM fills up the contents of it are then transferred back to your hard drive, this is a slow process and is what makes computers with lower amounts of RAM start to perform poorly when you have a lot of programs or files open at the same time.
More RAM means greater capacity for multi-tasking (having lots of files and programs open) without filling it up and experiencing reduced performance.