According to the legal eagles consulted and referenced on Politifact.com, "Lawful contact can occur in many instances when there is no reasonable suspicion of a crime. A consensual encounter, such as asking a police officer for directions, reporting a crime to a police officer, or being a victim of a crime or a witness and being questioned by a police officer, is a 'lawful encounter.' Also lawful are some stops premised on absolutely no individualized reasonable suspicion -- think about DUI checkpoints where everyone is stopped even if there is no individualized suspicion for the stop. The bill is clear that so long as the initial encounter is lawful, a police officer can then ascertain my legal status upon suspicion that I am undocumented." I read somewhere else, but I couldn't find that quote again, that simply saying, "good morning, officer" constitutes a "lawful contact".

I suppose that it's always possible that the Arizona legislature didn't know what they were passing and the governor didn't know what she was signing. I understand the the mayor of Phoenix has asked the city council to consider suing the state to prevent implementation of the new law.