The type of computer memory that is volatile and loses data when powered off is called RAM (Random Access Memory). RAM is essential for executing programs and processing data in real-time, as it provides fast read and write speeds necessary for smooth computing performance. When a computer is turned off, all information stored in RAM is lost, which differentiates it from non-volatile memory like hard drives or SSDs that retain data without power. Understanding the role of RAM is crucial in optimizing system performance.