Memory where software resides while it is running, along with the data it is using. Both the OS and application software use RAM.
RAM is a type of memory that is very fast, but is volatile, meaning all information is lost when electric power is removed. For this reason, it is useful only for temporary storage of data that requires fast access.
A device will typically have RAM and some kind non-volatile memory to store a copy of all software and data that needs to be kept when the device is powered off, or while that specific software is not running.
Devices with more RAM can run more complex software and/or more applications at one time.
Moving data into and out of RAM takes time. If data needs to be moved out of RAM to make room for other data, this can bring everything to a halt for a moment. Therefore devices with more RAM are more likely to have RAM free when it's needed, which keeps everything running smoothly (faster).