Encrypting RAM is about preventing unauthorized access to the RAM contents.
Under normal operating conditions, the Operating System maintains RAM access permissions and blocks applications from seeing memory from other applications; so we are talking about an attack context where the attacker plugs into the RAM "from the outside". It has been demonstrated in lab conditions. Theoretically, properly applied encryption could thwart such kinds of attack.
If RAM is encrypted, it must be decrypted automatically for usage by the CPU. The CPU does not operate on RAM directly; it loads code and data from the RAM into its internal caches. This loading/unloading process is transparent for both the applications and the operating system. This means that an automatic RAM encryption system is conceivable, but would have to be done in hardware, preferably in the CPU itself (if it was done in the RAM chips, the attacker could just freeze the RAM and then plug it into his own machine; similarly, decryption in an external RAM controller would not prevent active attacks).
Such CPU with RAM encryption exist (but are still pretty rare). This 15 years old article from Anderson and Kuhn cites the Dallas DS5002FP microprocessor, a 8051-compatible CPU, which is still in production today (the article explains that the encryption is actually quite weak).
Note that encrypted RAM (decrypted only in the CPU) cannot work well with DMA -- so disk and network accesses would be quite slow in a PC with encrypted RAM.