Facebook announced changes to its "Statement of Rights and Responsibilities" policy a few weeks back in the wake of a class action lawsuit settlement at the end of August. The update explained more in detail how users' profile data including profile picture, name, personal information could show up as part of a Facebook ad their friends may see.

The ads are tailored in attempt to provide users with more relevant ads. You'd rather see a friend like a certain ad instead of a nobdoy right?

For users who were unaware of Facebook's ad policy, the added transparency was alarming. The more detailed explanation was new, but the underlying meaning about Facebook's use of user data was not.

According to Facebook's Statement of Rights and Responsibilities:
You give us permission to use your name, profile picture, content, and information in connection with commercial, sponsored, or related content (such as a brand you like) served or enhanced by us. This means, for example, that you permit a business or other entity to pay us to display your name and/or profile picture with your content or information, without any compensation to you. If you have selected a specific audience for your content or information, we will respect your choice when we use it.
Your profile picture and information may show up alongside ads displayed on your friends' profiles. The ads seen by users may be paired with a "like" story if one or his or her friends has liked that.

You can also opt out of social ads without deleting your account. Just head over to Privacy Settings and click on the "ads" tab on the lefthand side and edit the settings so that your social info is not included in the ads.

You can't opt out of Sponsored Stories, which is another type of ad.

Your profile picture won't show up in strangers' feeds. They only appear within your network. And Facebook takes into account your privacy settings too.