Actually, (some) 32 bit versions of Windows can allow you to use more than 4GB of RAM. While a 32 bit address space does limit memory addresses to 2^32 bytes of memory, or 4GB, Physical Address Extension will allow the OS to address more than 4GB of memory using page tables.
Sadly, desktop versions of Windows are still limited to 4GB of memory, due to licensing restrictions. For server versions (and apparently according to this page, Windows 7?) PAE can be enabled. While the OS can then address more than 4GB of memory, each individual process/application is still limited to 4GB, unless it supports Address Windowing Extensions.
njtt, the reason that you your OS reports less than 4GB of memory installed is that some of the memory address space is reserved for all the various devices in your system. Since there’s only 32 bits of address space, this has became a problem as machines started approaching, and surpassing, 4GB of RAM. So, this extra memory, while not actually used for anything, doesn’t have anywhere left to be mapped to within the address space. This is not a problem with a 64 bit address space (1.84467441 × 10^19 bytes), hence 64 bit versions of windows won’t “eat” this extra memory on you.
Jihi, if you purchased Windows 7 separately from your machine, you should have received both 32bit and 64bit install discs. If it came installed on your machine by the OEM, they should have installed a 64 bit OS if you had 8GB of memory. Did you purchase a machine with a 32 bit OS on it and upgrade later?
Either way, if you do not have a 32 bit install disc, you should contact the manufacturer if you purchased a machine with an OEM Windows install, or otherwise contact Microsoft. They should be able to provide you with 64 bit install media (likely for a nominal fee). There are various “unofficial” ways out there to get PAE to work on any modern version of Windows, and get half-arsed support for over 4GB memory, but IMO it’s not really worth it, 64 bit is the way to go moving forward.
ETA: I may be talking out my rear end regarding the licensing limit for 4GB on desktop 32 bit Windows. There may very well have been some technical reason; I’m primarly a UNIX / Linux guy.