Address Book is Mac OS X's system wide contact manager. Apple is integrating Address Book more and more into the rest of it's products. With the latest video iPod and Mac OS 10.4.3 when you sync your iPod (and enable contact syncing) you will not only get your contacts, but also their photos on your iPod.
The latest Missing Sync 5 will now sync your Address Book photos to a compatible Palm device such as the Treo 650. When your phone rings it will display the photo of the person calling.

To add a photo:

1) Open Address Book
2) find the contact you want to add a photo to
3) drag a jpg (yes, I know other formats work too) onto the little square next to the person's name.

you can also click the Edit button to edit the contact, and then double click on the photo square and then either take a snap shot with your iSight or "Choose" a picture somewhere on your drive. Use the slider to control the crop and then click the Set button.