Why are there fewer contacts in my Newsletter Report than in my Contacts list?

One of the reasons might be a result of people unsubscribing themselves from your newsletter list.

When you set up an active client or enter a contact in your Console system, they are by default set to receive your newsletter. Each time you send out a newsletter, at the bottom of each newsletter is the "unsubscribe" link in which any recipient may unsubscribe themselves from your list. If a contact does so, then they will still remain in your contact list, but they will no longer be included in your newsletter distribution list.

So, when you run your newsletter report, the number of recipients might in fact be less than the actual number of contacts in your Console system. In any event, at the bottom of the generated Newsletter List, you have listed the clients who unsubscribed from your Newsletter.