This is addressed in th FAQs stickied to the top in the General Hardware forum.
Read this
All 32-bit Windows versions, including Win9x, WinNT, Win2K and WinXP (apart from Win2K/WinXP AS and DC) can ADDRESS up to 4GB of RAM.
Win2K/XP Advanced Server supports up to 8GB of RAM and Win2K/XP DataCenter can support up to 64GB of RAM.
Windows 95, Windows 98, Windows 98 Second Edition and Millennium Edition can only physically ACCESS a maximum of 2GB of RAM.
Win9x/ME can go up to 512MB of RAM before it requires an adjustment to the vcache to use more RAM. Under the [vcache] section of system.ini in the Windows directory, add the following entries:
MinFileCache=65536
MaxFileCache=65536
The above figures in kilobytes limit the VCache to a fixed size of 64MB and is merely a suggested size. The VCache can have a size of up to approximately 500MB.
For more information regarding the 512MB RAM limit and the workaround,
see this article.