In your system is REAL memory - which is the RAM it contains.
This isn't enough for what the system commonly requires - so there is also VIRTUAL memory - this looks to the software the same as real memory - but is just a storage space on the Hard Drive - which can be used when extra memory is needed.
As far as applications are concerned there is no difference (though space on the hard drive is a lot slower in use than RAM). The Operating System keeps track of all this - moving stuff onto and off from the hard drive to keep the speed up.
Clearly if you have enough Real memory - then the Virtual memory will hardly ever be used. Enough in this context is probably around 2Gb to cover most useage.
This is why the performance of a system can be increased by fitting more (fast) Real memory (RAM) so that the (slow) virtual memory (hard drive) is used much less.
If you have far too little Real Memory the computer will spend so much time changing things to and from the vurtual memory, that it has little or no time left to actually run a program - this is commonly know as "thrashing".