Many users are easily confused by Outlook's contact options - you have Contacts, the Address Book and the auto-complete list. Add Outlook 2010's Suggested Contacts and there is a lot to be confused about.
Contacts is just folder to hold addresses & phone numbers - email addresses, snail mail addresses etc - and personal information like spouse's name and birthday. Basically all the stuff you'd write in an address book or on a Rolodex card in years past.
The address book contains a list of all Contacts who have electronic addresses (a Fax number is an electronic address). It's not a "real" folder or contact list, but a virtual view of all contact lists available to Outlook.
I like to compare Outlook's Address Book to a shoe box or desk drawer where, in the past, we kept address books, business cards, and scraps of paper with addresses or phone numbers. The Outlook Address Book is a container that holds all your sources for addresses. Outlook Contacts folders and GAL (for Exchange users) are the address books, cards, and scraps of paper containing addresses stored within the drawer.
The Autocomplete list contains the addresses that come up when you begin typing in the To field. It's basically just a recently used list of addresses.
In older versions of Outlook, a lot of users stopped creating contacts and just used the auto-complete cache as their address book. Except the autocomplete list corrupted easily. Suggested Contacts was created for this group of people - they won't lose their addresses and the automatically saved addresses won't clutter up the "good" Contacts folder.
When I start to enter a name in the To... field, I am offered several possible names and addresses starting with that letter in a pop-up under the field, that do not correspond to ALL the ones that start with that letter in the contacts cards.
That is the auto-complete list offering names of people you recently replied to (well, the last 2000 people, so some might not be recent). You can disable this in options if you don't want to be offered any names. If you want to add all of your contacts to this list, open a new message and click To. Select all addresses and add them to the message. Close the message without sending and the addresses should come up when you start typing.
Suggested Contacts (Outlook 2010 only)
Suggested Contacts are contacts Outlook created for you and are email addresses only. This is a feature saves all addresses you send email to, automatically adding the addresses of people you send mail to, to the contacts folder. These are people you sent email to who are not in your contacts folder (or who Outlook couldn't find in your contacts - the look up is not very good and you may end up with duplicates).
Note: Suggested Contacts is only in Outlook 2010. It was removed from Outlook 2013. When upgrading from Outlook 2010, the Suggested Contacts folder is left in the data file but Outlook will not add new contacts to it. You can delete the Suggested Contacts folder if desired.