Q: In the Contact Tab, under Record Details what is Active Contact used for?
A: Some people like to use that for something like someone who has passed, but they want to retain their information for whatever reason. From Help "The Active Contact status is used to prevent the contact from getting printed, exported or emailed when set to No. If you find that a contact is not being contacted you should check this setting and make sure the value is set to Yes."
Q: If I choose No, that contact can no longer be emailed to.
A: In a group - correct. If you want to send an email to that contact individually it will send the email.