Set Up Groups
If you find your favorites getting too crowded, you can also set up groups. This is actually done using your computer since the iPhone syncs contact groups as well as all of your individual contacts. Simply create groups using Mac OS X's Address Book or Outlook on Windows. You'll then be able to click the Groups button at the top of the Contacts list on your iPhone and browse by group. This isn't as quick as browsing favorites, but it does help if you typically have many distinct sets of people you communicate with (family, school, work, specific projects or clients, and so on).