I've been seeing this viral message spread on facebook:
Facebook has agreed to let third party advertisers use your posted pictures without your permission. . . .
I decided to do a little investigation. Here's a quote from the Facebook blog:
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.
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.
So Facebook has already gotten rid of the networks/ads that caused these problems. And according to this article, changing the ad settings (as prescribed in the viral message) will not help one bit.
Keep something else in mind: if someone really wants to use your picture, there's not much you can do to stop it. Grabbing up pictures is as easy as doing a google image search.