What does more RAM do?

I recently upgraded my series 1 philips to two 160 drives. I think that the image quality is less now--even on live, which is presumably at best quality. Is it possible that I need more RAM? Is the image processed before it goes onto the hard disk (which it does even on "live" watching)? Is it possible that added RAM would improve the image quality? What DOES more RAM do, anyway...? (Do I need it to process or handle the additional disk storage cataloging, etc?)