If you want to organize your contacts into groups, you can create the groups you need. Click on the "Add Group" button. You will get a prompt to name the group. Once the group has been named you need to add contacts to the group. Click on MY CONTACTS, then check the boxes by the users you wish to include in the group. Once they are selected pull down the GROUPS button on the upper right of the CONTACTS screen and choose the group you wish house these contacts.
GMail Contacts and Groups can be quite useful if you figure out their structure.
Points to ponder:
The add a contact button is in the upper left of the contacts screen and looks like this -
GMail CONTACTS is about to have a makeover. It is alreday available in personal GMail. Stay tuned for the updates in CONTACTS. I think it will improve the interface and make it easier to use.