The physical memory of a computer is the memory that is actually installed in the form of solid-state chips, as opposed to virtual memory, which includes all memory, or swap space, which is an area of the hard disk used for the operating system to "set aside" older data when it runs out of physical memory.
Physical memory is one of the best, and by far the cheapest, of upgrades for most PCs bought more than a few months ago, because memory in the speeds used by such machines is very inexpensive. More memory will allow the machine to work much faster, and adding faster memory may make as much difference as a (somewhat more expensive) CPU upgrade. Some machines have a limit as to how much memory they can handle, typically 512 MB; it is important to check documentation. Note that most of this paragraph applies largely to IBM compatible machines.