Look again Marilyn, under Settings > Sounds. It's used with FaceTime and probably some of the third party video/audio communication apps. Might be new with iOS 5. I never looked before that.
@Mitch: Sorry, I can't really help here. I don't have anyone to play FaceTime tag with, so I can't do much testing. I did change my own contact in FaceTime to a customer ring. It worked when I used FaceTime to call the iPad from my iPhone. I assigned it in the FaceTime app, not in Contacts (though it does show up there). Maybe that made a difference.