What is advantage of using Leads as opposed to Contacts?

What is advantage of using Leads as opposed to Contacts?

Hi,

I am not clear on what the advantage is to using the Leads function, as opposed to putting all contacts in the Contacts area.  I like Contacts because I can tie a Potential to them. 

Are there advantages I'm missing to entering contacts into the Leads area first?  Asked another way, are there disadvantages to entering contacts into the Contacts area directly?

Thank you.