Welcome to the family....
First, you're likely in the early phases of the war. I, having just re-installed SH3 GWX myself, have noticed less contacts than I remember on my previous career that lasted well into late '43 (and only ended due to the lose of my computer at the time)...Just be more agressive.
And as to the lines..Map contacts on tells you where the ship is, if you can hear it. The length of the line is also how far away it is.