Physical memory increases when many applications run simultaneously reaching a bottleneck.Computers always need enough physical memory for smooth handling all running applications. According to the size and usage of application, consumes more memory. Operating system itself consumes some memory for handling all applications. So running out of memory lead to the unresponsive operating system.
Open Resource Monitor and click on the Memory tab. That will show you how your RAM is being used. Windows 7 is a lot better at allocating and using memory than previous versions of Windows. The basic philosophy of Windows 7 is "unused RAM is wasted RAM." Please post a screenshot of the Memory tab. Resource Monitor
Please upload full spec of your system and pictures of the services and process running , for detail analysis .