It really does have to do with that. If someone doesn't have a Mac then they don't get the full screen contact picture.
As for why it may come up sometimes and sometimes not, maybe you have separate contacts set up in your unified contact box (Google Contacts etc). I know for me I have a friend that in my contact list from my Mac, I only have her cell phone number - so when she calls from her cell phone I get the picture I have set up there. In my Google Contacts account I have her home number as well though, so when she calls from home I get a different picture.
Another way to get a fullscreen picture is if you have no contact photo chosen, then it simply uses your background picture.
If you set the picture on your phone it is a thumbnail in the corner, if you set it in your Address Book on your Mac it will be full screen.
I am reading some other posts and you saying syncing with you address book actually makes it a small picture. People are saying it may be a Verizon thing or a google exchange issue.
I just tried this. My setup syncs my iphone contacts and mac address book with Google.
Setting an image for a contact using my phone, the image was small when that contact called me.
Setting an image for a contact using my Mac's address book, the image was small when that contact called me.
Maybe the syncing with Google is what is causing the small images?
Update: I did a little digging around. If your phone is syncing with google for contacts, the images will all be small because google resizes them. If you are not syncing your contacts other than through iTunes, images you set on your phone will be big and images you set on your mac will be small.
I wonder if they will address this issue because i really dont want to turn syncing off.
Those people are clueless.
If you use a pic on your phone, it is big. If you use a pic from your PC/Mac/ whatever, it is small.
Actually, they're not. You are mistaken in your assessment. It is a Google Exchange thing, that when the contact data is sync'd up to Google it will resize the picture and then send it back to the iPhone smaller.
Leaving the Google issue aside (because I don't use Google exchange at all), if you add a picture to a contact on your phone, when that person calls you, you will get a full screen photo.
If you simply sync the contact from your address book on your Mac, you will only get a thumbnail.