a contact (in your phone) who has a name that is not their actual given name. it may be their nickname, what you secretly call them, or what they put themselves in your phone as.
if it is the name you secretly call them, it also may be used with your other friends, but not to the person's knowledge.
this name may be based on certain things that have happened to this person that you were either there to witness or have heard about, or it could be a random object that you decided would be their name.
the main reason for a contact name is so that you can talk about this person near other people and you don't want them to know what you're talking about.
person a: i'm hanging out with pineapple tonight.
person b: ouuu! fun fun!
person c: wtf? pineapple?
-person c leaves-
person a: so glad ben has a contact name...
person b: i know. person c would tell everyone you like him.