WELCOME ABOARD!
Contacts: The first thing to understand is that every SH game gives way, way, WAY more contacts than they ever got in real lifes. Supermods like GWX and NYGM cut the amount of contacts down until there are only WAY more than they got in real life. I use a program called
SH3 Contacts, which can be adjusted to increase or decrease the number of contacts available, the number of reports you receive, and the maximum range at which contacts will be reported. I use it to reduce all the numbers even further, but then I'm a little jaded after playing subsims for almost thirty years. I often spend weeks at sea and never encounter an enemy ship, coming home with no kills at all. Needless to say that's not the game most people want to play. You can use it to increase the numbers to your liking as well.
The lines tell you the distance and direction of each contact, in true bearings, i.e.
not relative to the boat. The bad news is that in the stock game they are perfect. You can measure them to get the exact range to the target, which is another thing that could not be done in real life. Grey contacts are merchants, red ones are warships, which is yet another piece of unrealism. A good soundman could tell fast screws from slow ones, but the game reports auxiliary cruisers as warships, when despite the fact that they were armed they were still merchants.