How to create Contact Groups in gmail

To create a contact group:
Click Contacts along the side of any page.
Click the New Group link on the left side of the Contact Manager, or select Create new from the Groups drop-down menu.
Enter the name of the group.
Click OK.

To add contacts to a contact group:
Select the contacts in the Contacts list.
Open the Groups drop-down menu.
Select the group you'd like to add the contact to, or select Create new to create a new group.

If you have multiple addresses saved for a contact, you can choose which address should belong to the contact group by opening the contact and clicking the small arrow next to the group you'd like to modify.