Basically, There are 2 language files to create to translate the component or module, one for the frontend, one for the backend.

These files have to be named following the convention:

[language-code]-[COUNTRY-CODE].mod_ajax_contact.ini

For example: en-GB.mod_ajax_contact.ini for english, pt-BR.mod_ajax_contact.ini for Brazilian Portuguese.

They have to be placed in the folder corresponding to the language and the frontend/admin part, for example:

 

For english

/administrator/language/en-GB/en-GB.com_contact_enhanced.ini
/language/en-GB/en-GB.com_contact_enhanced.ini

For Brazilian Portuguese

/language/pt-BR/pt-BR.com_contact_enhanced.ini

Inside these files, you add translations following the convention:

ALIAS=translation

Which would look something like this:

ENTER YOUR NAME=Enter your name

Or this in Portuguese:

ENTER YOUR NAME=Digite seu nome

Note that it is important that ALIAS is capitalize.

Be sure to save the file to UTF-8 format.