Selected groups will not become active until groups actually exist in the Address Book on your Mac. Ditto for "Add contacts created outside of groups...".
The last line refers to the option to automatically place contacts created on the phone into a specific group in Address Book on your Mac if none was specified at the time of creation.
In case you missed it before: Make SURE there is at least one entry in the address book on your Mac before you turn contact syncing on.
I will definitely create some entries in the Mac's Address Book before attempting a sync. But you're pretty sure there's no risk that once I do the sync, it won't try to sync with Outlook instead of the Address Book? I was wondering if maybe it won't give me the option to select which program to sync to until I actually execute the sync itself...
Thanks, it worked as you said. iPhone contacts are now in the Address Book, and the few entries I made there did merge into the iPhone contacts. Very relieved...
I did find this in that article http://support.apple.com/kb/HT1386:
"The first time you sync the Info tab with your iOS device, you are asked if you want to merge data, replace data on the service, or replace the data on your computer from the following applications:
Mac: Address Book, iCal, Microsoft Entourage, or Microsoft Outlook 2011"
Since this was the first sync from the info tab, I had expected it to ask me about merging/replacing, and possible from what application. But it didn't prompt me at all, just copied the whole iPhone contacts list to the Mac Address Book (and left my Outlook contacts list alone). I just wish Apple would make the process a little more direct and clear...