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Just noticed the last import an employee did - confused Job Title with Formal Title - we fixed it - but then the question arose - what is the field Formal Title used for - and I have no clue.

Its not in the user guide - not visible on contact dashboard - and not much discussion about it on SE - can someone shed some light on how formal title is used?

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The formal title is used for an additional prefix. For example, in German someone might be called Herr Dokter Suchandsuch, where "herr" stands for "mister" and "Dokter" for doctor. So it can be used for those kind of cases.

If you want it to be visible on the contact summary you can switch it on with Administer>Customize Data and Screens>Display Preferences>

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