Contacts on Iphone 4

here is a link to Apple's support article about what is included in the backup: http://support.apple.com/kb/HT4946

• Contacts* and Contact Favorites (regularly sync contacts to a computer or cloud service such as iCloud to back them up).
• App Store Application data including in-app purchases (except the Application itself, its tmp and Caches folder).
• Application settings, preferences, and data, including documents.
• Autofill for webpages.
• CalDAV and subscribed calendar accounts.
• Calendar accounts.
• Calendar events.
• Call history.
• Camera Roll (Photos, screenshots, images saved, and videos taken. Videos greater than 2 GB are backed up with iOS 4.0 and later.)
  Note: For devices without a camera, Camera Roll is called Saved Photos.
• Game Center account.
• Home screen arrangement.
• In-app purchases.
• Keychain (this includes email account passwords, Wi-Fi passwords, and passwords you enter into websites and some other applications. If you encrypt the backup with iOS 4 and later, you can transfer the keychain information to the new device. With an unencrypted backup, you can restore the keychain only to the same iOS device. If you are restoring to a new device with an unencrypted backup, you will need to enter these passwords again.)
• List of External Sync Sources (Mobile Me, Exchange ActiveSync).
• Location service preferences for apps and websites you have allowed to use your location.
• Mail accounts (mail messages are not backed up).
• Managed Configurations/Profiles. When restoring a backup to a different device, all settings related to the configuration profiles will not be restored (accounts, restrictions, or anything else that can be specified through a configuration profile). Note that accounts and settings that are not associated with a configuration profile will still be restored.
• Map bookmarks, recent searches, and the current location displayed in Maps.
• Microsoft Exchange account configurations.
• Network settings (saved Wi-Fi hotspots, VPN settings, network preferences).
• Nike + iPod saved workouts and settings.
• Notes.
• Offline web application cache/database.
• Paired Bluetooth devices (which can only be used if restored to the same phone that did the backup).
• Safari bookmarks, cookies, history, offline data, and currently open pages.
• Saved suggestion corrections (these are saved automatically as you reject suggested corrections).
• Messages (iMessage and carrier SMS or MMS pictures and videos).
• Trusted hosts that have certificates that cannot be verified.
• Voice memos.
• Voicemail token. (This is not the voicemail password, but is used for validation when connecting. This is only restored to a phone with the same phone number on the SIM card).
• Wallpapers.
• Web clips.
• YouTube bookmarks and history.

* Your contacts are part of the backup to preserve recent calls and favorites lists. Back up your contacts to a supported personal information manager (PIM), iCloud, or another cloud-based service to avoid any potential contact data loss.

Yes, doing a backup from one phone and a restore to another will move the content over. You are correct in worrying that the backup/restore won't work from an iPhone4 to an iPhone5 because of OS differences, although it *should* work as expected.

You SHOULD use "sync to iCloud" as a second backup/safety net - sync all the content like contacts, cal, notes to iCloud. Then you can sync the new phone to the same iCloud account.

Your iPhone contacts are automatically backed up upon every iTunes sync. Hence you can restore them from iTunes once you have upgraded to iOS 6.

The bit of a caveat with iTunes backups is that they cannot be partial - i.e. restore only your iPhone contacts, you must restore your iPhone to factory settings and in the process restore your contacts.

For that reason Apple have come up with the iCloud as an easire method to sync and move your iPhone contacts between devices. If you would rather not rely on the iCloud  and prefer to have your iPhone contacts saved in an offline backup, you might want to have a look at this tool which backs up iPhone contacts and subsequently can restore them to another iPhone.