Communicator performs a local contact search for incoming calls. If the number matches one of the contacts on the Communicator contact list, the name is shown on the incoming call screen along with the alert. Both the display name and phone number are shown when available.
If there is no match to a local contact, Communicator looks for a match in the Telephony Directory, and if a match is found, the available information is shown for the incoming call. If there is no match in the Telephony Directory, the display name is taken from the available information in the incoming call.
Whenever you retrieve your call logs/history, Communicator does a lookup in the local contacts and populates the name if a match is found.