Why is the recommended memory on a VirtualBox guest OS 512MB?
The issue with odd initial values—like the setup wizard recommending 512MB for the guest OS—is a known quirk in VirtualBox’s setup wizard that is nicely explained in this article on the recent release of VirtualBox 5; bold emphasis is mine:
The GUI for creating a new VM is similar to previous versions, though it provides odd default values. When creating a new Windows 7 64-bit VM, the wizard recommended allocating 512 MB of RAM to the VM; the minimum requirement for Windows 7 64-bit is 2 GB of RAM, making the recommended value inadequate. The host system has 8 GB RAM, over half of which was free at the time the wizard was started. The audience for VirtualBox is IT professionals who would likely know better than to attempt to use Windows 7 with that default value, so it is not a particularly substantive issue.
Also, the official VirtualBox end user documentation addresses the odd minimum of 512MB of RAM recommendation; again bold emphasis is mine:
Depending on what guest operating systems you want to run, you will need at least 512 MB of RAM (but probably more, and the more the better). Basically, you will need whatever your host operating system needs to run comfortably, plus the amount that the guest operating system needs. So, if you want to run Windows XP on Windows XP, you probably won't enjoy the experience much with less than 1 GB of RAM. If you want to try out Windows Vista in a guest, it will refuse to install if it is given less than 512 MB RAM, so you'll need that for the guest alone, plus the memory your operating system normally needs.
Which is all to say, while VirtualBox has a “wizard” that slightly eases the setup/install process of a guest OS, it’s not designed to make every single decision—or assume decisions—you should make. VirtualBox is not a simple end-user piece of software like Word or Excel; it’s really a true power-user/admin tool.
There is a certain basic assumption of a user’s skills/knowledge that is connected to using virtualization software like VirtualBox. And ultimately at the core of that assumption is that someone using VirtualBox will know enough to make their own basic decisions when it comes to resource allocation when setting up a guest OS in VirtualBox.
For example, I can definitely use Ubuntu 12.04 (server) as a guest OS on my Mac OS X install of VirtualBox with 512MB of RAM. But it noticeably lags if I stress the server a bit. I prefer to keep it running with anywhere from 1GB to 4GB of RAM to make sure things run smoothly; depending on what I am doing/testing at the time.
There's no reason why you shouldn't use 4GB virtual memory in VirtualBox if your guest OS requires it. I've done it myself, and with 4GB virtual memory I am getting near bare metal performance in a 64-bit guest OS.
VirtualBox Settings permits you to allocate a maximum of 128MB Video Memory from the VirtualBox GUI, and from the commandline you can add another 128MB Video Memory to the guest OS for a total of 256MB Video Memory. Open the terminal and type:
VBoxManage modifyvm "Linux" --vram 256
where "Linux" should be replaced by the name of your Linux guest OS in VirtualBox.
The amount of RAM allocated by VirtualBox is what the host computer will dedicate to managing that machine. This directly affects the performance of the virtualization.
If virtualizing a lightweight OS, such as Lubuntu or Damn Small Linux, you won't need much in the way of RAM to keep it stable with reasonable speed. Windows will require significantly more, and full-featured setups with complex/resource heavy GUIs will need even more than that to run well. Using 4GB of RAM instead of 512MB will simply give the VM more to work with. Unless it's required by the VM or you're going to be doing a lot of work, you can probably get away with the minimum or a little bit more.
Most importantly, you can always change the settings even after your VirtualBox is created. If things run slow, simply turn off the machine, allocate more resources, and turn it back on.
Note: Remember that a virtualized environment will never run as fast as the host with a setup like VirtualBox, so there's not going to be a problem giving it a bit more power to work with. Here's some more good information from Stack Exchange.