Consoles don't require the ram PC's do, the PS3 video game console contains the first production application of the Cell processor, clocked at 3.2 GHz and containing seven out of eight operational SPEs, to allow Sony to increase the yield on the processor manufacture. Only six of the seven SPEs are accessible to developers as one is reserved by the OS(XMB). One is powering the operating system, and the others are powering the game.
The XMB barely uses anything at all to run, this is why consoles don't need as much ram as a personal computer, if your gaming machine at home, has a virus scanner, messenger, background apps, browser tabbed, yeah you'll need a lot of ram. If sony had it in their hands right now, most they'd give it is 512. You'll see why bigger isn't that much of an issue when it runs reads/writes as fast as it does.
Edit, I have been doing microprocessing for 20 years, started doing Qbasic at 9 years old, there's not a lot I can learn currently about computers.
Pc's don't need 4 GB ram and 1-2 GB of gddr 5 ram to run antivirus, browser and OS in the background...
Look at my pc (stay with me here for a moment while I get to the point) :radeon hd4870 with 512 MB gddr5 vram and 4 GB system ram.
What happens if I run gta4 or crysis at 1280x1024 with texture quality on high and AA off/2x ? I get 40-50 fps.
What happens if i crank the res up to 1920x1080 and maxed out texture quality/draw distance or god forbid try to use 4/8x AA? my fps drops down to like 25-30 with loads of sturrering and framedrops to 1-5 fps for several seconds every time the games engine is forced to swap data to my HDD instead of my VRAM when it runs out.
What do we call that? A bottleneck.
What happens to the version of the same card with 1GB vram? also 25-30 fps but no framedrops...
The argument of XDR ram in ps3 being lightning fast compared to conventional GDDR 3 ram was valid 5 years ago, not today.
Now even the latest mid range graphics cards come with lightning fast GDDR5 running at 4200 Mhz and a bandwidth of 134 GB/sec (higher for high end cards)
Compare this to the paltry 25,6Gb/s theoretical bandwidth that sony claims for the ps3's XDR ram.
The next generation of cards (coming next month) and the current high end nvidia card (gtx580) will have 2 GB of vram (1.5Gb for gtx 580)
That's a 2 GB framebuffer, compared to the ps3's 256 MB and the xbox's paltry 10MB of EDRAM being used as framebuffer ,albeit it being super fast 256 GB/sec EDRAM with the option to also use the main ram (but sacrificing bandwidth down to 25 GB/sec..., which most devs don't do, because then the game runs like crap, so instead they render the game at a lower res -sub HD- , at 30 fps ,without AA or 2x msaa; with lower quality textures ,low resolution shadows, turning down draw distance, and without vsync and triple buffering (saves like 50MB of ram aswell.))
ALL to make sure that they can fit their frame buffer and back buffer inside the 10MB of edram...
Using crysis as example (simply because it will display ALOT of info through the console while playing if you want it to), that game, even at moderate resolution with AA off, will use upto 1.8 GB of my system ram and ALL of my 512MB VRAM.
Why? because it doesn't make compromises on texture quality (combined with high AF settings),has high quality post processing effects (high quality per object motion blur, color grading, etc), high precision shaders (high shadow resolution etc).
All of these things require large amounts of memory (and high memory bandwidth to get a good framerate).
Last gen consoles only had to render games at 640x480 (307.000 pixels) and didn't have things like dynamic shadows, aa to eat up insane amounts of ram and because of the lower resolution, lower res textures looked okay.
That's why they managed to get by with 64 MB of system ram.
Ps3 and xbox meanwhile like to pretend to be able to render graphics at 1920x1080 (tru hd grafixssxs bro) so 2.073.600 pixels , add tons of shaders and some AA, which obviously requires exponentially much more memory and a much higher bandwidth (just talking about memory reqs here not gpu power).
The measly 256 MB of vram (+256 MB system ram) that the ps3 has to work with (same scenario for 360 though there its 512 MB of shared memory + 10MB EDRAM framebuffer) is not even nearly enough to achieve all of those at the same time
So developers have to try their best to optimise the game as well as possible and find dozens of tricks to save memory and bandwidth :
Low res textures hidden behind shaders and bloom as most basic example, reducing draw distance, rendering no more than absolutely needed,morphological AA( recent example) , not using tripple buffered framebuffer or just no vsync at all, etc etc.
Some are better at it than others (naughty dog, PD) but that does not change the fact that they are constantly fighting these stupid limitations and that it's a huge pain in the ass and that it requires many , MANY compromises and sacrifices to make it work and still have alot going on onscreen.
The only reason neither system has more ram, is because ram prices were much, MUCH, MUCH higher during their development cycle.
Initially MS wanted to design the xbox with 256MB of ram instead of 512; until after much complaining from developers, epic games showed them a comparison demo of how awful gears would look like when having to be designed with that ram limit in mind compared to with 512MB and they had to change their design.
(they calculated that including 512MB gddr ram in the 360 would cost them almost a billion extra over the entire lifecycle of the console ,so they were reluctant, funnily enough it's peanuts compared to the amount of money they throw at marketing and the amount they spent on recalled 360s with RROD due to an unfortunate design flaw).
Long story short : ps3/xbox360 games wouldn't suffer from all these compromises as much if they had more ram, and we most likely would have gotten better shadows, 4x AA , better textures, better draw distances and more cars on track. (to a certain extent, the gpu itself is still not very powerful, but atleast the awful memory bottleneck would make a big difference)
edit :
http://www.youtube.com/watch?v=A2ZqK0o82Sk&feature=player_embedded e.g the dissapearing shadows on the road barrier wouldn't happen if it wasn't for the ram limit, nor would dust particles causing the car to become jaggy, nor would the jaggy shadows.
I bet PD had to spend so much effort , time and resources to get the game to where it is now, and I feel bad for them for having to work in such 'conditions' (the limits).
With some of these problems (dust artifacts) they probably just threw in the towel eventually, saying **** it this is as close as we'll ever get on this piece of **** hardware
Hopefully they will put a decent amount of ram and vram in the next consoles (2-4GB ram and 1.5GB+ VRAM -or more if it's high enough bandwidth to finally work with much better textures-).