It's showing you all available contacts so, for example, if you use google mail all those contacts, all on your sim card and it links in to Facebook and the like as well.
You can set your main contacts list to only show your google contacts but I found when you look up a contact to phone them it'll show all the duplicates again. I went through them all and deleted the duplicates - takes a while but worth it. There may be a quicker way though.