Ok so recently i bought 2 gb of ram to help speed up my comp.I havea regular compaq desktop with 165 watt PSU and when I put the 2gb of ram in and started my comp up and immediatly I smelled smoke coming from the PSU. now when I start my comp up the fans goes on really loud but my monitor keyboard and mouse dont start up, I was wondering if i have to buy a new PSU or is there something else i can do?

I would remove the old PSU as soon as possible. Having a damaged power supply can lead to other components getting damaged as well. The PSU in my mind is the most important part of the computer. 165 watts would barely cut it in any situation for me. I would replace it with at least 300 watts. and a good 300 watts. Don't go too cheap. But first make sure it will fit in the case, as sometimes they can be proprietary.

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