Removing a group is very simple, and can be done with or without deleting the contacts within the group.
First, navigate to the Manage Groups section, underneath the Contacts header.
On this page, you will see two options for deleting your groups.
'Delete group' will simply remove the group itself, and any contacts within that group will remain in your contact list, just no longer assigned to the deleted group.
'Delete group and Contacts' will also delete the group's contacts from your contact list. These contacts cannot be recovered, so only select this option if you are certain that you will not need these contacts or the analytics data associated with them.