The Basics
-The big difference between 32 bit systems and 64 bit systems is the “Addressable Space”. Each device in the system is assigned an address, which takes some of this space. Because the address space is limited, the more hardware you have, the more space is required to address them. Memory (RAM) will get what is left over, and it is this that takes usable memory in a 32 bit system from 4Gb of RAM to around 3.25Gb (Edit: or less).
-Most software today is written and optimized for 32 bit architecture. This means that there will not be a large performance increase by switching. However, for the few pure 64 bit programs out (such as 64 bit Photoshop), there can be a substantial difference.
32 bit OS
-A 32 bit OS can only address 4Gb of memory. Some of this is then allocated to hardware devices, usually dropping the available RAM to 3.25Gb or 3.5 Gb.
-The addressable space also applies to programs, giving a 2Gb limit of RAM to any one process. This means that 32 bit Photoshop can only ever access up to 2Gbs of RAM.
-Drivers are always a concern. Drivers for hardware usually have a 32 bit version, and there is usually not a problem with 32 bit drivers (finding or using).
-A 32 bit OS has a lower memory requirement to run. For Windows 7, the minimum RAM needed is 1Gb