Facebook wants to show us ads that will be interesting and relevant to us. Here is some of the info that might be used to do this:
1. Information that we have added about our self, like our current city, sex, age, relationship status, jobs or schools
2. Interests that we have listed in our profile (timeline) and the Pages and groups we are connected to
3. Actions we take on Facebook, like the Pages or Groups we visit or the apps that we use. Keywords from our posts and status updates. This is done using an automated system. No one at Facebook reads our posts.
4. Note that including more content on our profile (timeline) that relates to our interests may improve the relevance or focus of the Facebook Ads we are looking at.
How this works:
Facebook has created ad clusters (ex: sports lover, moviegoer, etc. ) that advertisers can use to target their ads. For example, a theater might want to target moviegoers and we might be a member of the moviegoer cluster if we have Liked a number of Pages associated with movies and if we mention movie in your posts.
Advertisers can also target their ads based on topics and keywords. For example, an advertiser can target their ads to the topic Sports and anyone on Facebook who Likes anything sports-related may see those ads. Or, can use a keyword, like The Sound of Music, which will cause the ad to be shown to Facebook members who have specifically liked The Sound of Music Page or added it as an interest on their timeline.
As always, none of our information is shared with advertisers. All ad targeting is performed by an automated system. Advertisers are also not able to see any information about the people who view or click on their ads.