If you only root your phone, nothing happens. You just have access to a new category of apps, including Titanium Backup, which can back up all your applications and their data to SD card. This info can be restored by re-installing Titanium and using its restore after you flash a new ROM.
As for contacts, you should know that contacts are synced automatically to the Google cloud. Every contact you have ever added directly to the phone should be in the "My Contacts" section on http://contacts.google.com. These contacts will automatically sync back to your phone when you connect your Google account to any Android device. Even if you decide not to flash a new ROM, you should still check to make sure that all the contacts you want to sync to future devices are there. You never know what might happen...
And if you like the Sense UI, use this ROM: http://forum.xda-developers.com/showthread.php?t=1106799 -- it's the best Sense ROM for the Incredible, and a great ROM in general. Not as fast as CM7, but it's very pretty, and has good battery life.
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As for contacts, you should know that contacts are synced automatically to the Google cloud. Every contact you have ever added directly to the phone should be in the "My Contacts" section on http://contacts.google.com. These contacts will automatically sync back to your phone when you connect your Google account to any Android device. Even if you decide not to flash a new ROM, you should still check to make sure that all the contacts you want to sync to future devices are there. You never know what might happen...
And if you like the Sense UI, use this ROM: http://forum.xda-developers.com/showthread.php?t=1106799 -- it's the best Sense ROM for the Incredible, and a great ROM in general. Not as fast as CM7, but it's very pretty, and has good battery life.