In addition to the information referenced by Bill B. I thought I'd add my experience with a T500 and a couple versions of Linux as well as some ruminations on what happens to the rest of the 4GB address space.
First, 32 bit addresses can address 4GB RAM. the only way to address more (with a 32 bit Intel or similar processor) is to add some additional address bits elsewhere (PAE I suppose does this.)
Aside form the RAM, the computer must address other I/O devices such as the PCI bus, video card and probably other devices such as chip set control registers. These also fit into that 4G address space. Often times these are spread around that upper (or lower) address space so a few K or few M of registers and such are probably spread about a much larger space. In addition to this, some laptop video cards use system RAM instead of having their own dedicated memory. (I don't know if that's the case with any Lenovo laptops.) That's a brief description of the "why."
I bumped my T500 up to 4GB because I can.
And (going through another reliable vendor) was a lot cheaper than the Lenovo upgrade. Using Memtest86+ the speed of one stick of the new memory is reported at 3186 MB/s which matches the factory RAM. With two sticks, this went up to 3529. That's nearly an 11% bump in apparent memory bandwidth, but will only come into play on cache misses so the actual effect will be overall increases memory throughput of probably about 1% (assuming a 90% cache hit rate - not unreasonable.)
The preinstalled Vista Home Basic reports about 3GB RAM. I probably have a higher number than you because I do not have the dual graphics and guess that you do. I'm sure the % usage that Vista reports is based on the memory it sees and not the total installed since it does not know about anything beyond about 3 GB.
The 32 bit Ubuntu 8.10 Live CD seems to recognize the same amount of RAM.
The 64 bit Linux kernel that installs/upgrades with Ubuntu 8.10 (2.6.27) reports the full 4 GB of RAM as would be expected.
At present I have to suggest that the bump from 1-2 GB is well worth the money because it provides more working room for either Linux or Vista. Expanding beyond that reaps diminishing returns unless you have some tremendously memory consuming programs to run.
If you are running a 32 bit OS, I wonder if it is even worth the expense to go beyond 2 GB. But w/out dual graphics, at least you can gain about another 50%.
Despite the low present memory utilization I have no regrets about spending the extra $$$ to go to 4GB. That should leave me lots of room to grow over the expected life time of this laptop and those times when I do something that requires more RAM the system sill handle it with ease. (And those buggy programs with memory leaks will run that much longer before they bring the system to its knees.
)
best,
hank