Why is 640x480 my only resolution option?

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.