It could just be that you have a 128mb VRAM card with the rest being shared. This was quite an issue in my laptop which had a 128mb VRAM graphic card but showed 678mb as the memory devoted to it. These types of cards share memory from the system memory but only the original dedicated 128mb is used for games and multimedia work.
Some say you can change the amount of shared memory from the bios(I am not clear on that part) but if you want to play games, 128mb would be what the graphic card would use since it wouldnt make a difference if you decrease the amount of shared memory or increase it [Note-It's difficult to increase shared memory].
Read the 'Integrated graphics solutions' section in this article for more info:-
Wikipedia Link