What exactly is VRAM used for?

Video RAM is specifically designed to store anything that is necessary to render a frame of video. When gaming, this includes textures, models, and other graphics-specific data like shader information and lighting maps. Generally, none of this data is stored in main system RAM as you alluded to, although VRAM is not specifically designed to reduce demand on regular RAM.

Minecraft is a bit of a different beast than most games. I'd assume you're playing the Java version for PC. Java is a (relatively) high-level programming language compared to others such as C or C++ which other games will commonly be written in. Because of this, Java is inherently at a disadvantage when it comes to memory usage requirements. This is why your main system memory takes such a huge hit when running Minecraft, a very resource-intensive program written in Java.

I'm not surprised that your video RAM usage is low, though - and truthfully neither should you. As it is only meant to store textures and models, and Minecraft is, well, a game based on cubes and 16x16 textures, I think you can realize why your VRAM usage is so low.

Java Minecraft is CPU heavy, but the GPU really has very little to do, graphics-wise it is very simple and graphics resources are very small in comparison to say… Call of Duty. When I say small, I mean very small, 100MB sounds about right.

Because of the “block” design of the game, you can fill the screen with relatively little resources needed. Its like using “Duplo Lego” instead of “Lego Technics.”

Java is an “interpreted” language, meaning it is not compiled down to native instructions. So when it is run, it needs a virtual machine to get the instructions (or bytecode) into something the processor will understand. Your CPU is doing more work than the GPU.

The Java VM, like that used in Minecraft will appear to be using a lot of RAM because of the way it will reserve large chunks of system RAM before it uses it. This appears to the OS as the application actually using that much RAM. Java uses its own memory Heap which works somewhat independently from the operating system on which it is running. (it will still use calls for growing the Heap)

The texture loading in minecraft is fairly low. What also might be happening is the way your OpenGL driver is allocating textures. For example, in OpenGL 3.3, GPU buffers can be mapped to memory such that a write and subsequent flush to that memory section causes it to appear inside the GPU's VRAM automagically. The tricky part of this is whether this buffer is truly only on the GPU side, or if it is actually on both the CPU and GPU side and the driver is simply copying it from one buffer to another. The OpenGL spec says the driver can do either at its discretion. The result is that the CPU/Java side allocates lots of address space for the buffer and we may have two copies of the buffer: One on the CPU side and one on the GPU side.

It's also possible that the java program is still storing the images in RAM in its own cache, then loading/unloading it to/from the GPU as it is needed. This would require RAM usage to always be at least the same if not greater than VRAM usage.

More recent video drivers and iterations of OpenGL support HSA Architecture, which enables the VRAM to act like a cache - the program doesn't even "upload" a texture to the GPU - it simply passes a memory address to an already loaded texture, or even references the texture from a file which as been allocated into virtual memory. This makes evaluating resource usage more difficult because now instead of simply using RAM or VRAM, we may be using only memory address ranges in some cases, and some of those ranges could be assigned to RAM and some to disk, and the VRAM could appear limitless or zero-used since, as a cache it is only storing recently-used pages which could change arbitrarily!