Leads are the raw details you gather about individuals or representatives of organizations who may be interested in your business. They are usually collected from various sources like the internet, trade shows, seminars, advertisements and other marketing campaigns.

Whereas contacts are the people in an organization with whom your company has business communications, in pursuit of business opportunities. Let's understand this with an example.

Patricia is a realtor. She attends a real estate expo, where she networks with a lot of people. About 10 people she meets are either looking for a house or office space. Now she sees these people as sales opportunities. She can't say that they are going to become her customers, but she thinks there is a chance, however small. In marketing lingo, these ten people are now her "leads." So she adds their details as Leads in her Zoho CRM account.

The following week, she calls up all these ten leads, four of which are actually interested in what she has to offer them. Now by following up on these leads, she has successfully "converted" the leads into "contacts". These four people are no longer random leads. So in Zoho CRM also, Patricia converts these leads into contacts. If a person is in the Contacts module, it means that they are your potential customers.