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Contact flags are used to indicate ways in which specific volunteers should or should not be contacted. Use them when doing mail merges, printing mailing labels or sending e-mails to filter out people who don't want to be contacted. Contact flags can also be used to show how a person wants to be contacted. For example you could define the contact flag "Send newsletter" to designate people who want to receive newsletters.
There are several built-in contact flags which you cannot change or delete, e.g. "Do not call", "Do not e-mail" and "Do not mail".
Deleting a contact flag removes that contact flag from all people who currently have it.