In the past couple of days, a rumor has begun spreading that claims Facebook have changed their policies for third-party advertisers and the use of users photos. These rumors are false, and Facebook have made no such change in their advertising policies.
If you see a Wall post or receive a message with the following language or something similar, it is this false rumor:
FACEBOOK has agreed to let third party advertisers use your posted pictures WITHOUT your permission.
The advertisements that started these rumors were not from Facebook but placed within applications by third parties. Those ads violated our policies by misusing profile photos, and we already required the removal of those deceptive ads from third-party applications before this rumor began spreading. This has been confirmed by Barry Schnitt on Facebook's Blog.
I quote from his blog entry,
We are as concerned as many of you are about any potential threat to your experience on Facebook and the protection of your privacy. That's why we prohibit ads on Facebook Platform that cause a bad user experience, are misleading, or otherwise violate our policies. Along with removing ads, we've recently prohibited two entire advertising networks from providing services to applications on Facebook Platform because they were not compliant with our policies and failed to correct their practices.
Facebook have confirmed that their are committed to remain vigilant in enforcing their policies to prevent bad ads from appearing on Facebook—whether served by themself or a third party. They have advised that if any user see a misleading ad or believe it violates their policies, report it to them.
If it's one of their ads, you can simply click the thumbs-down icon that appears above or below the ad to report it. If the ad is from a third-party application, click the "Report" link at the bottom of the page to report it to the developer and Facebook.