Yes, it will sync with Outlook as well.
"Making a call with iPhone is as simple as tapping a name. You won’t need to re-enter all your contacts because iPhone syncs with the address book you already use on your computer — Address Book or Entourage on a Mac, or Outlook or Outlook Express on a PC. If you keep your contacts on the web using Yahoo! Address Book, iPhone can sync with them, too. To get ready for iPhone, organize your contacts in one of these applications and make sure they’re up to date with the latest phone numbers and email addresses. If you don’t have contacts on your computer, don’t worry. You can still enter them directly into iPhone."