23 year old Harvard Student Mark Zuckerberg launched the highly anticipated Facebook Platform yesterday at a developer event held in San Francisco.
The platform API would allow, for example, a third party to recreate Facebook Photos, the most used photo application on the web. Users could then remove the default Facebook Photos and install the third party version instead.
Applications can serve their own ads and/or conduct transactions with users. Ads can basically be shown anywhere that Microsoft ads are not currently shown.
There will be a special applications area on Facebook where users can browse and add third party apps. But there is also a crucial viral component - when a friend adds an application, it is noted in their news stream on their profile. Clicking on the item brings you to the app, where you can add and/or interact with it yourself.
Dan Lewin, Microsoft VP, got on stage talking about integration of Popfly into Facebook, Microsoft demonstrated several examples of applications that use Facebook's APIs.
Since the advertising deal between Facebook and Microsoft I wouldn't be surprised if these two become extremely strong partners (think Intel) or Microsoft acquires Facebook in the near future.