When you add a new friend to Gmail chat, sometimes the email address is added as their contact name, if you want to add real name in your chat list, in place of address, you would earlier do this, by going into contacts, select the contact profile, add the name, and then save it.
But now with the new version of Gmail (launched for Firefox 2 and IE7) you can make edits to Gmail contacts directly from the chat list. I find it to be a great time saver. All you have to do is hover your mouse over one of your contacts to prompt a pop-up with contact details. If you just click on the contact name, it will automatically become an editable field. Simply type in the desired name and hit "enter." Your changes will save the name in your chat list as well as in your contacts.
Source:→ Gmail Blog
Google, Gmail, Gmail Chat, Tips