It's in fact true that you are limited to 4GB of RAM in a 32Bit OS. When talking about Windows you can say that you're gonna have 3GB Ram for free and 1GB which Windows uses for itself. That's just a rough guide though as you're going to get a bit more than those 3GB for various reasons. I don't know all of the influences which play a role for this but e.g. depending on you using a GPU which grabs some your memory or not the amount of memory you have for your applications differs. Something around 3.3 is a quite usual number though (I myself have 3.25GB)...

In order to use more memory you need a 64Bit OS. It's not very widespread in terms of Windows (quite different for Linux) because of the 64Bit XP version being crap and getting nearly no driver support by the vendors and Vista sadly still went for two versions of it where you have to choose between 32 and 64Bit plus in its former days using the 64Bit version really was no fun especially in terms of driver stability. I'd like to see Windows 7 finally being 64Bit only - dunno if Microsoft wants to do that...

Enjoy your meal
Toast