What kind of RAM should I use for my iMac? My Specs are as follows:

Model Name:    iMac
  Model Identifier: iMac10,1
  Processor Name:   Intel Core 2 Duo
  Processor Speed:  3.06 GHz
  Number Of Processors: 1
  Total Number Of Cores:    2
  L2 Cache: 3 MB
  Memory:   4 GB
  Bus Speed:    1.07 GHz
  Boot ROM Version: IM101.00CC.B00
  SMC Version (system): 1.52f9
  Serial Number (system):   W8008JEF5PC
  Hardware UUID:    EECDACBD-AF6B-5B3E-B382-2702F2AA64AD

Current RAM:
Memory Slots:

ECC:  Disabled

BANK 0/DIMM0:

Size: Empty
  Type: Empty
  Speed:    Empty
  Status:   Empty
  Manufacturer: Empty
  Part Number:  Empty
  Serial Number:    Empty

BANK 1/DIMM0:

Size: Empty
  Type: Empty
  Speed:    Empty
  Status:   Empty
  Manufacturer: Empty
  Part Number:  Empty
  Serial Number:    Empty

BANK 0/DIMM1:

Size: 2 GB
  Type: DDR3
  Speed:    1067 MHz
  Status:   OK
  Manufacturer: 0x80AD
  Part Number:  0x484D54313235533642465238432D47372020
  Serial Number:    0x108343E7

BANK 1/DIMM1:

Size: 2 GB
  Type: DDR3
  Speed:    1067 MHz
  Status:   OK
  Manufacturer: 0x80AD
  Part Number:  0x484D54313235533642465238432D47372020
  Serial Number:    0x101343E9


What sort/kind of RAM should I purchase to improve the current RAM capacity?
Should I buy an extra 2 x 2GB RAM or 2 x 4GB?
Which Slot should it be inserted to should I purchase the new RAMs?
Will it have a negative effect on the overall performance?
Getting a performance boost depends on what you actually do with the thing.  Run Activity-Monitor (Applications>Utilities) to see how much of your RAM is used.  Most Mac stuff runs well on 4GB, but if you run memory intense stuff (Parallels-Windows, Video Editing, editing large pictures with photoshop) you should see an improvement.  But even if you don't need the RAM, you should not see a performance penalty (i.e. it may or may not run better, but won't run worse).

Unless your computer is already slowing down to a crawl with the current configuration (when doing memory intense work), adding 2x 2GB should be enough (giving you a total of 8GB).

So, given your configuration, I'd add 2x 2GB to the free slots and keep the memory that is already there in the other slot.