And what do you think happens on a desktop or server? The memory is shared by multiple processes/programs.
A server is probably running a lot more tasks at once than a desktop, and the amount of memory per task may in fact be less for a server than for a desktop. This is why an entry-level virtual private server has less RAM than even an entry-level desktop PC.
It's not the world's fault that the vendors sucker you into crap hardware with only 512MB of RAM.
The desktop box in question was probably built a decade ago when 512 MB was a lot. It shipped with 128 MB and the motherboard had two PC133 slots that maxed out at 256 MB each.