RAM stands for Random Access Memory, which is crucial in computing as it temporarily stores data that a computer is actively using. This allows for quick read and write access by the processor, enabling efficient multitasking and faster application performance. Unlike permanent storage, such as hard drives, RAM is volatile, meaning it loses its content when the device is powered off. Higher amounts of RAM generally improve system responsiveness and performance, particularly in resource-intensive applications like gaming, graphic design, and video editing.