In Android, there are TWO different memory allocations: one is for USER memory, which is where your pics, vids, music and other personal data are stored. You seem to have plenty of room here.
The other is SYSTEM memory, which is where apps, app data, call log, messages, etc. are stored. This is the part that appears to be full.
Try cleaning app caches with a cache cleaner from Play. Another great app is SMS Cleaner, which allows you to delete old messages while keeping newer ones. Or delete your call log. These actions can help free up system memory so you can add more contacts. I hope this helps.
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