The June 2010 issue of Journal of Accountancy includes a very helpful article by J. Carlton Collins, "Fortify Your Facebook Privacy Settings." It provides step-by-step instructions for creating lists of friends, hiding friends from non-friends, blocking third-party Facebook applications, protecting yourself from networks and Facebook advertisers, preventing photo/video tag mistakes, and more.
You may also want to check out Facebook's Privacy Guide for more information.
What I've learned so far is that social media is blurring the lines between our professional and personal lives. Be informed and take action to protect your reputation and personal brand.