An address list is a collection of recipient and other Active Directory objects. Each address list can contain one or more types of objects (for example, users, contacts, groups, public folders, conferencing, and other resources). You can use address lists to organize recipients and resources, making it easier to find the recipients and resources you want. Address lists are updated dynamically. Therefore, when new recipients are added to your organization, they’re automatically added to the appropriate address lists.
CRITICAL UPDATE – Exchange 2010 Address List Segregation and Current Support Stances:
From The Exchange Team Blog about Exchange 2010: http://blogs.technet.com/b/exchange/archive/2010/05/12/3409941.aspx
Exchange 2007 info: http://technet.microsoft.com/en-us/exchange/bb936719(EXCHG.80).aspx