Social advertisement is a relatively new form of advertisement on Facebook that may use pages and products that you have liked in advertisements. Facebook basically recommends things that you have liked to your friends, and things that your friends have liked to you.
Facebook explains the advertisement concepts on the site on the about ads page, explaining how advertisement works on the site. The site uses two factors to decide which ads to display to you. First it takes into account the things that you do on Facebook. This includes information on your profile, things you like, or your location. It does also take into account information from others, like friends you interact with on the site.
Here is an example how social ads look like on Facebook, and how the very same ad looks like if the feature has been disabled.
By default, Facebook social ads are only shown to your friends and no other users on the site. It would not really make lots of sense to display them to users anyway that do not know you.
Facebook notes that the following applies to social ads:
If you do not want your name to be displayed in social ads on Facebook, you can disable the feature on this page. There you find a preference to disable social actions with ads on Facebook. Just click on the pulldown menu that should display only my friends and switch it to no one to disable the advertisement feature. Do not forget to click on save changes to finalize the change. (thanks Caschy for the tip)Advertisement
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