The video encoding is unlikely to use much RAM because its meant to be done in dedicated hardware, but more importantly it has to be real-time, like the WiiU GamePad.
Also we do not know how much of the background processes will run on the dedicated ARM core, and THAT I would expect to have its own RAM also. So a lot of background processes that ordinarily might take up game resources are being offloaded onto dedicated hardware in the PS4.
However I do agree with one thing, the extra RAM will mostly be used to avoid having to optimise games memory usage. However, if that means we end up with games NOT plagued with issues (eg Skyrim PS3) due to struggling to manage the RAM properly, and gets games out quicker, then I'm all for it.
At the end of the day, I think Sony realised they messed up with the PS3 and with the PS4 they are throwing everything but in the kitchen sink in there to avoid the same problems again. The console is going to be EXTREMELY scalable.
That said, I think Nintendo to some extent have done the same with the Wii U by keeping 1GB of RAM for the OS/system. It seems highly unlikely its using much of that today but as they were rushing to get the console released on time they held back a lot of RAM so they could expand the functionality over time without running into another Sony problem, not enough RAM reserved for the OS to add all the functionality the end users wanted.
I do not think having 7GB of RAM for game use is a stretch at all, there are already games on PC that run into the 4GB 32bit addressing problems. As all games on PC transition to 64bit its not at all unrealistic to see them eating 4GB of system RAM and 2GB of GPU RAM. The idea is they will be able to then port these over to PS4 relatively easily, so allowing developers to use 6-7GB of RAM makes a lot of sense.
Edited by Alex Atkin UK, 11 April 2013 - 02:31 PM.