Let's start with a simple question. Do you read the usage agreements when you sign up for a new online service? No? Most people don't.
If they did, they'd be rather concerned. In Facebook's Data Usage Policy, for example, Facebook freely admits it catalogs information like your IP address, the pages you visit, your GPS location, and — of course — all your friends and relationships.
Facebook certainly doesn't stop there. Any web site that features a Facebook Like button or has any Facebook widgets may report your browsing history back to Facebook. So even if you don't specifically Like a page, Facebook probably knows you've been there.
Facebook also gets information from advertisers, and any advertiser in its network may help gather information that's reported back to Facebook's data centers.
Even more to the point, to quote from the company's Data Usage Policy:
We also put together data from the information we already have about you and your friends. For example, we may put together data about you to determine which friends we should show you in your News Feed or suggest you tag in the photos you post. We may put together your current city with GPS and other location information we have about you to, for example, tell you and your friends about people or events nearby, or offer deals to you that you might be interested in. We may also put together data about you to serve you ads that might be more relevant to you.
We also put together data from the information we already have about you and your friends. For example, we may put together data about you to determine which friends we should show you in your News Feed or suggest you tag in the photos you post. We may put together your current city with GPS and other location information we have about you to, for example, tell you and your friends about people or events nearby, or offer deals to you that you might be interested in. We may also put together data about you to serve you ads that might be more relevant to you.
