Relationships tie your contacts and accounts together. For example, if you have a contact that is related to multiple accounts, you can relate the contact to each account and label the relationship accordingly. This way, the contact shows up under the Contacts tab when viewing the account.
You can also relate accounts to contacts. For example, if you have an account that is one of several accounts related to a contact, you can relate each account to the contact and label the relationship accordingly. This way, the account shows up under the Accounts tab when viewing the contact.