Gmail added three new built-in contact groups. "Friends, Family, and Co-workers are groups to help you organize your contacts. You can move contacts in and out of these groups at any time. Various Google products let you share information with people in these groups. In addition, you can create a Google profile to help people in these groups keep in touch with you. They will be able to easily find your profile from various Google products."
iGoogle is one of the services that will use these groups for managing your shared activities. One size doesn't fit all, so separating your contacts could simplify the way you share and receive information.
If you don't like the new groups, the bad news is that you can't delete them. Try to ignore them, but keep in mind that they'll be useful at some point.
Google has three other default contact groups: My Contacts (manually-added contacts), Suggested Contacts (email addresses collected from your conversations) and Most Contacted (20 frequently-used email addresses). Google no longer automatically adds email addresses to My Contacts. "Only contacts that you've edited, imported or added to a group will remain in My Contacts. This will provide everyone with a clean slate and, we hope, a better point for syncing contacts with mobile devices."
{ Thanks, Roody. }