Random Access Memory is one of the key elements for evaluating a computer. Generally speaking, the more RAM a computer has, the better. RAM is definitely a factor in how fast a computer will perform. It is also a major factor in predicting how often a computer will "hang up." Certain programs, such as some games, will not run at all if a computer's RAM is insufficient.
History and Source
The name RAM is a historical accident--of course the access is not random. It is very calculated and deliberate. At the time this word was coined, the almost universal storage medium was magnetic tape. To access data on tape, it was necessary to look for the data from the beginning of the tape--sequential access. When disk came along, it was possible to go directly (or almost directly) to the data you were looking for. It is like the difference between looking for a word in a novel (sequential access) and looking for a word in the dictionary (direct access). The acronym DAM was objectionable, so it was called "Random Access Memory" which gave the more palatable acronym RAM. This acronym also went nicely with another kind of memory called Read Only Memory, ROM.
RAM is where a program resides while it is running. Launching a program means loading the program (from disk) into RAM. The central processing unit then executes one instruction at a time from RAM. This is why some programs require a minimum RAM size; the program is so big that it needs a lot of RAM to hold it. When running multiple programs (when there are multiple windows on the screen) each program takes up part of RAM even if it is inactive. This is why having a lot of windows open can slow down a computer's performance; it reduces the available RAM. The reason that programs have to be in RAM to run is simply a matter of access speed. Accessing disk is about a thousand times slower than accessing RAM.
There are ways around the RAM speed and space requirements. To increase speed, modern computers have a small amount of memory called "cache" (pronounced "cash") between RAM and the processing unit. Cache memory is very fast (and very expensive). Programs run faster when the processor is accessing cache instead of RAM. The computer automatically keeps track of loading disk to RAM and RAM to cache as needed. To get around the RAM space restriction, modern computers use a technique called "Virtual Memory." The program is divided up into pages and one page at a time is loaded into RAM. This way a machine with only 1 GigaByte of RAM can run a 4 GigaByte program. When the loading of pages starts to take up more time than the execution of the program, the computer can "hang." This condition is called "thrashing." The cure is to get more RAM or a bigger cache.