Summary: Sometimes 640x480 is your only option. We'll look at ways to work with this.
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640 by 480. There was a day when we were excited to have it - and with all of 16 colors. Now, 640x480 is so "small" as to be unusable in most cases. Even the most basic new computer supports at least 800x600, if not 1024x768 or much higher.
But what if it appears that 640x480 is your only option?
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640x480 "VGA" resolution is the lowest-common-denominator - by definition all PC's, graphics adapters and monitors must support at least VGA. Because it's the one thing that can be counted on to work, and always work regardless of your hardware selection, it's often used as the fallback when troubleshooting, or the default if your computer doesn't know it can do any better.
To change your resolution, in Control Panel, Display, and then the Settings tab, you'll see something like this:

Yours may vary based on what hardware and drivers you have installed. And there's the rub - if you have the wrong drivers, or the default drivers, installed, the slider under Screen Resolution may not give you any option other than 640x480.
So what to do in that case?
99% of these problems are simply not having the correct video drivers installed for your machine. Normally, and especially in a case where your computer has come pre-configured from the manufacturer, this will already have been done. And, unfortunately, exactly where you go to make sure you have the proper drivers will vary based on where you got your computer, and whether or not you installed a new graphics card yourself.
To see what your computer "thinks" you have, right click on My Computer, click on Properties, click on the Hardware tab, and then click on Device Manager. Expand the node labeled Display adapters by clicking on the boxed plus sign in front of it:

If it says something like "default" display adapter, then Windows does not know what kind of adapter you have, and what its capabilities are - thus is must assume the lowest common denominator: 640x480.
If this was a pre-packaged machine, get in touch with the manufacturer's technical support - you'll need to locate and install the correct driver for whatever video card you have. If you installed a new video card yourself, you'll need to locate the drivers for it (they should have come with the card) and install them.
Article C2456 - November 10, 2005
Acer Aspire 5920G cant change resolution or colour? Stuck on lowest res and 4 bit colour? could it be my graphics card thats cooked??? didn't install any new drivers? Please Help...
Posted by: Steyn at July 14, 2009 1:22 PMMy screen is huge, I'm not able to change the resolution from the Display option which is set to 640x480 and 16 colors. Also the Hardware wizard keep appearing pertaining to the video adapter, please help? Dell PC, XP Home Edition.
Posted by: Nica Williams at August 12, 2009 5:54 PMhey my computers resolution was fine while installing windows xp bu then it changed to 800x600. i only have two options and it is 800x600 and 640x480. both resolutions bring up weird colours. pls tell me how to fix this.
Posted by: Peter at October 15, 2009 3:12 AMSo we just got a new HP, the monitor is a HP2709m which is a 27". The drivers were installed properly (I think) as NCDIA GeForce 250 and the screen resolution is 1920 x 1080 but it dosen't fill the screen. There is like an inch of black all around. Is there anything i can do about this?
Posted by: Anonymous at October 23, 2009 10:23 AMI got a pc in the office called Tcon, no idea where the boss got it from. I had to reformat the pc and now its stuck in 4 bit 640by480 resolution. I opened the computer but it looks like it doesnt have a separate card. The mother board is intel d845epi/d845gvsr. Any ideas how i can get the right drivers for this, also maybe what software can help me find the right drivers?
Posted by: Sanjoy at December 2, 2009 7:49 AM