To add up on what SoupNutz said, those are Java Virtual Machine launch arguments which define how much memory the application has access to.
I don't play minecraft, but for how cpu and memory intensive it seems to be, I'd try setting these variables. It's a Java application, after all...
-XX:MaxPermSize=256M
-Xms=512M
-Xmx=2048M
That will make it run with a base of 512mb of memory, eventually getting up to 2gb if needed (unless you're using hd tex packs or external shaders I doubt you'll need more). It'll also increase permanent data's space to 256mb, which should make things slightly more responsive.
These settings are also pretty good to add if you want a more intelligent memory management, but may get things slightly unstable if minecraft works by assuming these aren't enabled...
-XX:+UseConcMarkSweepGC
-XX:+CMSPermGenSweepingEnabled
-XX:+CMSClassUnloadingEnabled
Either way, your cpu isn't exactly high end, and minecraft requires a lot of beef from that, so don't expect miracles out of it.