Guaranteed/burst memory is specific to OpenVZ and other OS-level VM's. Essentially, your VM thinks it has 786MB of RAM, but only 512MB is guaranteed. If there is enough spare RAM lying around (and there often is, since not everyone maxes out), you could use up to 786MB; otherwise, you may run into memory allocation errors when you try to allocate additional RAM. It's basically a way to oversell virtual servers, but it's not nearly as bad as shared-host overselling.
Xen uses a different memory allocation strategy. You are guaranteed the advertised amount of memory, but then you also get to use a certain amount of swap. Xen tends to be more popular in some circles because it behaves more like a real server, in this respect.