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Remove the CPU shield, this will reveal the "top slot". This is the user-serviceable RAM slot, though there is a a second slot of RAM under the CPU card.
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The iMac uses PC100 Laptop Ram, and according to Apple, it supports up to 256MB RAM (2X128MB) but unofficially. Some later models can support 512MB (2X256MB).
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Push the tabs out, and the RAM should pop up, then pull the ram out.
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