System Memory or Video Memory?

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Matty
 #1
This is a fairly basic question, but I would like to know:

When a texture is loaded does it use up memory on my video card, or system memory.

So if I have 256 Mb of system memory and only 32 Mb of memory on my graphics card am I
limited to loading textures so that the total memory consumed must be less than 32 Mb by
those textures?