When restoring your iPhone with iTunes, your iPhone is erased followed by re-installing the current firmware version, which is 2.2.
After 2.2 is re-installed, you will be prompted to restore your iPhone from your iPhone's backup, which is created and maintained by iTunes. This is the default selection. Your iPhone's backup is updated if needed as the first step during the sync process. There is another selection to restore your iPhone as a new iPhone, or not from your iPhone's backup.
This must be followed by a sync to re-transfer select iTunes content including apps, photos transferred from your computer to your iPhone, and if you sync contact info, calendar events, and bookmarks with a supported application on your computer.
Your iPhone's backup includes data such as most iPhone settings, email account setting, SMS messages, notes, recent calls, call favorites, photos captured by your iPhone, 3rd party app settings and any data created and stored by a 3rd party app, and contact info.
As already provided, the iPhone is designed to be synced with a supported application on your computer for contact info. Not a good idea to depend on your iPhone's backup for this data along. Contact info is not stored on your iPhone's SIM card.