You create a Feature.

You need to add an item to the context menu of a list.

Which type of element should you use?

A.
a CustomAction

B.
a ListInstance

C.
a ListTemplate

D.
a Module

Explanation:
MNEMONIC RULE: “context menu item = CustomAction”

A custom action can be added inside a secondary XML file, part of a normal feature. It is defined by a “CustomAction” element type.

How to add a custom action to list elements context menu
http://www.dev4side.com/community/technical-articles/sharepoint-2007/how-to-add-a-custom-action-to-list-elements-context-menu.aspx