Sweet, to the point.
I will try to give you the longer, drug out version...
Linux works with your hardware to provide you blazing speed. This is the reason you have good hardware isn't it, to make your system run faster? So, Linux sees that you have 256mb of RAM and decides to put it to work. It will draw as much mem as possible to do the task you are currently working on, when you switch a task, it will then use as much memory as possible on that task and so on. Instead of 'reserving' RAM for some unknown purpose, it utilizes your resources.
I hope this explains it a little better.