It means that if the program requires 1GB to run then it will be allowed to use that amount of memory. But no memory is reserved by advance by Sweet Home 3D.
Note that the installed version of Sweet Home 3D is a 32 bits program, i.e. you can't set max memory higher than 1.5 GB. At his time, the 64 bits version can be run only from the JAR executable version, or the portable version.