Facebook applications see everything on Facebook that you can.
They can access your profile. The developer can read your wall posts or collect your contact information.
You could be exposing your contacts' data. Or, your contacts could expose yours.
What can developers do with profile information? They may steal your identity. More likely, they'll use your data in ads.
Developers may sell advertising within applications. They are barred from using your personal information. Still, some may violate Facebook's policies.
To prevent this, only install verified applications. These have a green checkmark in the application directory.
To uninstall apps, click Settings, then Application Settings. Click the X next to an application to remove it.
Facebook has promised changes to prevent misuse of data. You should soon have more control over what data applications can access.
Facebook may use your profile pictures in ads it sells. This happens when you become a fan of a product or publication. These social ads are displayed only to your contacts.
To prevent Facebook from using your photo, click Settings, then Privacy Settings. Select News Feed and Wall. On the Facebook Ads tab, find the Appearance dropdown box. Select "No one" and click Save Changes.
And remember that ads on networking sites are much like newspaper classifieds. They're not vetted. Products may not work as promised. Or, they may advertise sham work-from-home opportunities.
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Excerpt from a longer article
http://www.usatoday.com/tech/columnist/kimkomando/2009-09-17-twitter-facebook_N.htm
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