The online world is hopping about a rumor that Facebook is planning to give third parties access to user information, such as phone numbers and home addresses. Many Facebook users are expressing shock that the company is looking to monetize their personal information. These people are probably also staunch believers in the Tooth Fairy, trickle-economics and go rushing for a dictionary whenever someone tells them that "gullible isn't actually a word".
It's very simple: Facebook is a business and their goal is to make money. They make money through advertising and selling virtual goods. The more of your personal information they can mine, the more likely their advertising will result in revenue for Facebook and their clients. Facebook provides hundreds of millions of people with a wonderful platform for sharing photos, news, links, videos without charging its users... but it isn't a charity.
Some use Facebook accounts for business purposes, building brands and professional networking. Most use it for social reasons like staying in contact with family, friends, acquaintances, people you have never met, unrequited high school crushes, etc. If you have information that you want to share with only some friends but not others, then either don't place it online or assume that whatever you place online will eventually become available to everyone. If you don't want your contact information distributed, then don't provide it in your profile. If you don't want everyone to see that video of you breakdancing naked in the park, then don't put it online. If you do post that video, then assume it will be distributed to the entire online world.
What about privacy settings? You need to set them. It's your responsibility and no one else's. Facebook wants you to share as much as possible since it helps them monetize your account. Consequently, the default settings tend to be "opt-out" rather than "opt-in", knowing that most people don't review their privacy settings. When you add applications, you are authorizing that program to access your data so if you want to be cautious avoid applications.
You are responsible for what information you post about yourself, the Facebook friends you link to, the privacy settings and the applications you use. You can minimize your exposure by not uploading anything you don't want the entire world to see, by friending only people you actually know, by reviewing the privacy settings and by avoiding applications that use your private information.
Alternatively, you can convince yourself that a huge for-profit company whose business model is based on monetizing your personal information really wants to protect your privacy. For readers who believe that story, did you know that you don't get any hits when you Google "gullible"? Really, go ahead and try it.
Author's note: For information on improving your Facebook privacy, please see this article.