While I've never had any problems with slowdowns on my Linux system because of this, this issue always confused me.

I'm running SuSe 10.1, KDE 3.5.1, on a 3GHz Intel CPU, with 1GB of memory (+ 4GB of swap memory).

Open applications:
Thunderbird
Opera
aMule (currently doing nothing)
Konqueror
OpenOffice.org (3 documents)

I'm the only user currently logged in.

And yet, the top command gives the following:
Where does the full 1GB of memory usage comes from? If this is right, I shouldn't be able to, say, play a video--which I know I can. So why does this say I'm using all this memory, and if I'm not really, how do I find out how much I'm really using?

Take a look this article from the gentoo forums if you want to understand Linux memory management.

you'll find a thousand question slike this if you search and the answer is this is the linux full memory model. what's the point buying loads of ram if you don't get any use from it? linux stores old memory in ram in case it's needed later, that's basically where it goes.