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Is there a way so that when I go to favourites in the phone and hit a certain contact, it just calls them instead of going to yet another screen and hitting the phone icon.
I am already in the Phone section, so its pretty obvious that I want to call the favourite.
Any advice?
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It's not a widget but a shortcut.
Hold finger down on home screen until menu comes up
select shortcut
then select direct dial it will then open your contacts
Hope that helps 
You could just create some "Direct Dial" widgets on one of the home screens; this will mean that when you tap the widget for the relevant contact it just starts dialing straight away.
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Sounds great.
how do I do that?
Anyone?
excellent. Thanks Heaps.
Its sad that someone from Sony could not tell me and also uses the wrong terms.
Well Done gibbylinks. 
The Xperia S Android 2.3.4 widget for Favorite Contacts disappears when you update to Android 4.0.4.
A workaround is to manually add Shortcuts to 'Direct Dial' or 'Direct message'. You have to do this manually, but it has the advantage of choosing once and for ever whether you want sms/email/mobile/home. BUT I STRONGLY SUGGEST YOU CREATE A 'FAVES' FOLDER AND MOVE ALL DIRECT DIAL SHORTCUTS INTO THIS FOLDER, so as to prevent accidental misdialing. Or at least move the icons away from the edge of the screen. (I just woke up my sister...)
Alternatively, click Phone or Contacts, then click Groups at the bottom, then click the Star at the top (which means Favourites). There should be a shorter way of doing this, but I can't find one. (You can toggle Contacts into Favorites by clicking on the star on each line, and synch this with Gmail contacts - nice.)