Contact and Address book settings are found in three locations in Outlook. These settings control the search order of the address books (when Outlook needs to resolve the addresses) as well as the display in the address book when you click to To button.
One area which leaves many users confused is where the Outlook address book gets the display names from. As seen in the screenshot below, Contact's File as field is used in the Name field of the address book and the email display name (Display as) field is used for the Display name field. If a contact does not have an electronic address, they will not be listed in the address book.
Note that when you change the Address book display format used in the Name column, the new format is not displayed in the Address book until you restart Outlook.
To remove the email address from the Display as/Display Name field, see Bulk Change Email Display Name Format.
In the Address Book's (Ctrl+Shift+B) Tools, Options dialog, you'll find the options to select which address book is shown first when you click To, where your personal addresses are kept, and the order auto-resolution searches your address books.
The dialog is slightly changed in Outlook 2010 and newer, due to the new feature where Outlook chooses the sending account based on the folders you are viewing.
This is the dialog in Outlook 2007 and older:
You can choose to start with the Global Address list (Exchange server accounts only), the Contacts folder, or Custom order. If you maintain one contacts folder for all accounts, the Custom order is best, but it can be confusing if you have separate address books for each account type.
Contact Options (in Options dialog)
In Tools, Options, Contact Options you can control the file as format and the default name order. In Outlook 2010, this dialog is at File, Options, Contacts.
The default name order tells Outlook that "Mary Smith" is in first name last name format. If you prefer to enter names in last name first name format, without using commas ("Smith Mary"), this is the setting you'll need to change.
When Outlook files names in "Mary, Smith" format, check your default name order setting. Changing this setting will not change existing contacts, it applies only to new contacts.
Restart Outlook to insure changes made here to take effect.
Please note that changing this does not change existing contacts, it applies only to new contacts. You need to edit existing contacts, or use the macro at Bulk Change File As Format for Contacts or, if a number of contacts have the first and last names in the wrong fields, see Macro to Swap First and Last Name Fields.
Account settings, Address Book settings
Directory and Address book settings are found in Account Settings (Tools menu in older versions or File tab in Outlook 2010). This controls the sort order you see when you click the To button or view the address book. Double click on the address book or select it and click Change. Restart Outlook for changes here to apply to Outlook's Address Book.
If your contacts use different FileAs formats, we have a macro you can use to change them to a universal format at Bulk Change File As Format for Contacts.
This video tutorial is specific to Outlook 2007, but it's similar in newer versions, although the menus have changed or moved.