How is it possible to run two programs at once that require 8 megabytes and 12 megabytes of RAM?

First, if you are using a computer that uses MB, go spend $100 on a used computer and you'll have something that has at least 1GB.

As for your question, the amount of ram you have installed in a computer is not the only memory a computer can use. The actual name depends on the OS, but all computers have a section of the hard drive set asside to act as RAM. On a Windows PC it's called a Page File. The advantage is that you can use more ram then your computer has. The disadvantage is that it requires your computer to read, write, and rewrite this section of the drive over and over, which can be hard on the hard drive, and cause it to fail more quickly.