If someone you know has an iPhone, you can list it as such in your contacts.
as in adding their phone number?
Correct. Let's say "John Appleseed" has an iPhone and you know this when entering his number. You'll have the option to list it as 'iPhone' instead of 'Mobile'.
Not that it matters to me but it doesn't seem to work under Exchange. I'm using Gmail exchange and the option isn't there but if I store a contact on my phones contact list it'll be there.
Correct. Let's say "John Appleseed" has an iPhone and you know this when entering his number. You'll have the option to list it as 'iPhone' instead of 'Mobile'.
Wonder.. whats the point of doing this, does it matter which phone the other person has and BTW iphone is also a mobile
Prob. makes sense with imessage but still when you want to send a message there is no easy way to know if other person has iphone or not...
Gmail's Exchange/ActiveSync isn't fully compatible. There are quite a few inconsistencies including what you found. With iCloud you should see the iPhone option and not have some of the inconsistencies and restrictions that using Gmail's Exchange imposes.
I REALLY recommend using iCloud email/contacts/calendar. I had Gmail/Google for email/contacts/calendar when iCloud was introduced. The incompatabilities were enough (especially with contact syncing) that, when my Google calendar came up totally blank, I decided to put in the time to switch. Haven't had any problems since. Plus, the interface works so smoothly - PITA but worth the effort.