I can't believe only one other person has stated this as I thought it was pretty obvious. If you remove the contacts you won't have it in your phone cause the phone pretty much refers back to the contacts application when you look up contacts through it (you ever wonder how it knows what is in your contacts book? I guess if you've never used contacts I could see you not noticing. Go into your contacts. You'll see it has all the contacts you added through your phone).
Honestly, I don't care if they allow you to remove it (but then you'd not have a contacts list on your phone either, maybe a better solution is to allow you to hide it), but I'd be annoyed if they actually removed it. Cause some of us actually use it (and not just for phone lists, as some one else said, for addresses, birthdays, and other such stuff). Honestly, it's almost a standard to have some sort of contacts program on your telephone. Even my old simple non smart phones had a contacts program (that allowed you to put more than just phone numbers but addresses and even birthdays).