In the skype party discussion today we talked about an example in which a "contact" would get turned into an "organization".
One example would be in a sales process. In this type of example, a "lead" will be person or organization in the system without much information. In B2B often times all you have is the organization info. As the "lead" is contacted, info and activities get added (calls, meetings, etc...).
Once a certain point in the sales process is attained, the "lead" will become an organization & a contact or maybe just a contact. If doing B2B sales, the lead often becomes an Organization and a contact. Some information goes to the contact, some to the organization. In most commercial CRM's, this is the point in which an "opportunity"** is created (which would be a different type of entity, not a "party"). This auto-conversion and opportunity creation is often times what CRM's will call "sale force automation" (or at least a big part of that fancy word).
In some sales processes this "lead" will always be a person and will always just become a contact...
**an opportunity is the an estimated amount of a sales deal. See: http://www.sugarcrm.com/kb/modules/leads-modules-app/whats-the-differenc...