What is 32-Bit and 64-Bit?
The computer terms, 32-bit and 64-bit, refer to the way a processor, the CPU, in the computer, handles information. (Note a bit is either a 0 or 1. Everything that is on the computer must be reduced to that binary number sequence.) Everything like documents, music, videos, and pictures must be reduced to bits so that the CPU can process them. To learn more about CPUs in general, please see What's Inside a CPU?
Both types of processors handle data that comes from another hardware device - memory, otherwise known as RAM, or Random Access Memory. The 64-bit version of the Windows 7 operating system handles large amounts of RAM more effectively than the 32-bit system version of Windows 7. There is even talk that 128-bit CPUs and operating systems will be the next big thing to come.
A 64-bit version of Windows 7 can access physical memory (RAM) that is above the 4-gigabyte (GB) range. This is a limitation of 32-bit Windows 7. It cannot address physical memory above 4 gigabytes.
Windows 7 can be installed as a 32-bit operating system or 64-bit. So, depending on the version, an installed version of 64-bit version of Windows 7 supports from 1 GB of RAM up to 128 GB of RAM. The ability to act on more physical memory lets Windows 7 reduce the time needed to swap processes in and out of RAM. This means that the operating system can manage and control the processes more efficiently. This memory management capability helps improve the overall performance of Windows 7.
Source: 32-bit and 64-bit Windows