Unified Contacts is a new feature of Windows Live Messenger that combines your Windows Live Mail address book with your Windows Live Messenger contact list. Unified Contacts makes it easy to interact with all the people that are important to you using Windows Live Messenger, even if you don’t have an Instant Messaging address for them. In Windows Live Messenger, contacts from your address book automatically show up in your contact list with a grey contact card icon next to their name. They cannot see your status and you cannot instant message with them. You can add and edit address book contacts in Windows Live Messenger, including entering a birthday or phone number. If you have the appropriate information entered, you can email and call these contacts using Windows Live Messenger.
note: changed Hotmail to Windows Live Mail. – thanks szajd for noticing.