Contacts are the people that are used in a Reservation, Check-out, or Item Custody. Only if they are linked to a User, they can log in.
Linking a Contact to a User
Go to your Settings in the bottom left corner of your screen
Find the User you want to link to a specific Contact
Click the Actions dropdown, next click Link to Contact
In the popup window, find the Contact to whom the user should be linked
Similarly, you can unlink Contacts from Users as well.
*When inviting someone to your team as a User, a Contact for that user will be added automatically.