WordPress (currently 3.5.1) limits the memory usage to 32M for single-site installations and 64M for multi-site installations on the front-end. In the back-end it is set to 256M (if possible) by default. This is done in the PHP-code, it means that your current web server setup needs to allow setting php.ini variables from code.
I recently wrote about Moving WordPress into RAMÂ to gain a significant performance boost. This is however a bold move and there are a lot of other things you can do to gain performance, one of them is using a newer version of MySQL (and why not take a look at Percona Server?).
There are a lot of things you can do to optimize WordPress to run as smooth as possible including optimizing Apache and MySQL, introducing cache layers and more. That is just fine, and they should be done in a production environment. In a development environment however, it is another story. Here you have the option to do radical things for radical results. Like, moving all data into RAM!