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Most modern top-level Android devices, e.g., Samsung S4, has:
Does the amount of internal memory/storage make any difference - for instance how many apps you can install or does the size of the storage only affect the number of images/music pieces/... you may download to the device?
I agree with the answers on the performance part but what the number of apps?
The answer is...It depends.
As a rough equivalent between Android and Windows PCs:
Allocation of RAM works differently in Android, vs. say Windows or Unix. The usual notion of more is better doesn't necessarily correlate here.
As I understand it, it's diminishing returns once you go beyond what's required. Android basically tries to keep the apps/files you use most cached in RAM. Swapping in and out as it finds necessary. Once you're beyond what's needed, then it seems like Android just starts caching random and useless things. That's why if you use a Task Manager on your phone there always seems to be "stuff" running that you might feel inclined to just kill and free ram...But there's a lot of debate that says you should leave it alone and let the Android OS handle it.
As for Internal Storage, I personally go for the biggest I can get in my budget. The Android OS files go there, all your settings, music, photos, and apps by default are installed here. Nowadays though internal storage offerings from manufacturers are larger and larger and options to put files on external storage are getting better and better.
Considering today's offerings and requirements, I'd personally suggest when buying a new phone to get:
The internal memory is where most things are stored by default such as: apps, music, pictures, and any other things that require to work offline at times. External storage handles the same things, except it can be removed from the device and usually serves as extra space if you want to install several apps, keep lots of music, or take tons of pictures, etc. You also might have to specify if you specifically want things stored on the external memory.
The internal RAM is the same as that on a computer and just allows process to run faster as there is more memory for them to access when they need it quickly. You ideally want the most of everything, but all phones are going to have much less RAM compared to internal and external storage. This is all very similar to the way computers handle things too. The computer has a small bit of RAM, and then a much larger hard drive.
Secondary storage does not really effect standard performance, since most memory written and fetched is in RAM. Secondary storage should be seen as a priority in terms of managing space and resources and to help increase access time, but the real performance is dependant on architecture design of the system, RAM, and CPU speed, cache, and other factors weighing in.
Also, secondary storage is for storing data so it remains there when you turn the phone or, battery dies, etc. RAM is electronically erased when there's no power in its capacitors, and all data fetched, retrieved, executed, or otherwise executing is gone. Secondary storage is non-volatile, so the data remains on it. Think of it as a drawer where you put stuff in, but takes time to open and move stuff out of. Think of the top of the dresser as RAM, where you're always moving stuff ...
