Remove the CPU shield, this will reveal the "top slot". This is the user-serviceable RAM slot, though there is a a second slot of RAM under the CPU card.
The iMac uses PC100 Laptop Ram, and according to Apple, it supports up to 256MB RAM (2X128MB) but unofficially. Some later models can support 512MB (2X256MB).
Push the tabs out, and the RAM should pop up, then pull the ram out.