Facebook's enormous business power comes from the information users provide about connections to other people. One of the ways the social network uses that data is to display ads for businesses that already have a connection to a user's friends.
"Everyone wants to know what their friends like," Facebook says in their description of their "Ads and Friends" tools.
This business strategy is why you may see an advertisement for a furniture company, for example, next to a picture of a Facebook friend that already likes the company's Facebook page.
Your account history could also be used for this purpose, but Facebook says the same privacy settings that limit who can see your posts would also limit who can see your presence in social ads.
Facebook will allow users to opt out of seeing ads tailored for them, but does not allow opting-out of being used in social ads shown to other users. To opt out, visit the "Ads" section of the "Account Settings" menu and look for the small, blue "Opt out" link.