Windows XP, Windows Vista or Windows 7 have 32 bit operating systems as "default" so to say (Windows 7 can be 64 bit as well).
The 32 bit system can only use up to 4 GB RAM. The operating system will reserve about 750 MB RAM for running the PC.
It sounds like you are running a 32 bit operating system XP, Vista, or Windows 7 (32).
The 32 bit Operating Systems are only able to see and use about 3Gb of RAM. To use a greater amount you will need a 64 bit OS (either Windows XP/64 or Windows 7/64) or one of the open source 64 bit operating systems.
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