Contact Type is a multi select field that can be used as a way to mark a contact-specific detail. For example, you could use type to mark if a contact record is willing to provide a reference, a review or their overall health as I client. It's important to note that this field does not have lifecycle tracking the way a contact status would.
1. Click into Tools & Settings > Contact Settings
2. Scroll down to Contact Types and use the green "New" button to add in your list
3. You can then apply these types to a Contact record in the "Contact Type" field, located in their Contact Details section