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There are a few ways to define and represent relationships between contacts.
Categories may represent your relationships with the contacts roughly. For example, you may have categories "Friend", "Relative" and "Classmate".
Bindings define relationships between contacts, at least partially, as nobody of your friends and contacts will disclose all his/her relationships with others, for privacy concerns. Thus, even with assistants from some online services (for example those web base social networking websites) which aggregate relationships of subscribers, you still practically need to maintain other links of relationship by yourself manually.
Generally you know every contacts in your address book, and recording relationships between people is to find out whether they know each other. After all, they may know each other in the future through your introduction.
Even if finding whether they know each other is not your big concern, however, creating link between a person and an organization will make redundant data input unnecessary, as you might have many contacts working in the same organization.
If you use static binding, when looking for contacts working in the same organization, you can just simply click on the Associated tab of the Edit Company window, the contacts will just be listed.
If you prefer using loose binding, you will need to go the the Search window, define file name as Company (or whatever you will use for the field name of organization), and search the company name.