It will use it, but a certain amount is reserved for hardware addresses.
So with 4Gb, 3.25Gb is available, max.
32 bit XP can only use up to 4Gb of RAM.
XP X64 can use up to 128Gb of RAM.
32 bit Vista can use 4Gb of RAM (Vista Starter Edition 1Gb max).
64 bit Vista Home Basic - 8Gb.
64 bit Vista Business, Enterprise and Ultimate - 128Gb of RAM max.
Does that help?