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I have a Radeon HD 4550 which supports up to 512 MB of shared memory. When I open the catalyst panel, in the information tab I see that my video memory is only 128 MB which is the base memory or the graphics card. Is this shared memory feature supported in ubuntu? and if yes how can I use it? I use the latest propriety drivers that amd support page offers online.

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HyperMemory is primarily a marketing term and the Windows drivers are more marketing friendly. I think you can safely assume that the default fglrx settings are optimal. Make sure you enabled all possible features in the BIOS if possible.

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Yes it is supported in Ubuntu, we just don't see the gimmicky naming scheme being used.

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