When used in the context of databases, memory refers to RAM directly addressable by the CPU as opposed to going through the I/O subsystem.
In the context of a database server, Memory refers to RAM that is directly addressable by the CPU through load/store operations. Disk memory, whether mechanical or solid state is addressed through the I/O subsystem. Data on such devices must first be copied into RAM before it can be accessed by the CPU.
Data can be accessed several orders of magnitude more quickly when it is in memory, so allocating memory for caching data can bring great performance benefits to a system.