While the blogosphere is slowly discovering what Facebook Beacon does, MoveOn.org, a US advocacy group, has launched a campaign against the new advertising system. They’re asking users to sign a petition and join a Facebook group to protest what they call a “huge invasion of privacy”.

With the help of this blog post from Charlene Li (Forrester Research), I’m starting to understand more what the Beacon ad product does. Charline explains that her husband bought a coffee table on OverStock.com and that when she next logged in to Facebook, she saw this mention at the top of her newsfeed.

She explains that “Facebook Beacon is merely a small piece of script that allows the partner site to put a cookie on your browser. So when I bought the table, an Overstock cookie was created, which then transferred the information to Facebook. Facebook then checks to see that the same browser is logged into Facebook, and shows the information.”

Many in the blogosphere are concerned by this new ad product. In response, Chris Kelly, chief privacy officer of Facebook, said in Wednesday’s Wall Street Journal that “Facebook is transparent in communicating to users what it is tracking. When a user visits an outside site and completes an action like buying a movie ticket, a box shows up in the corner of his Internet browser telling that person the outside Web site is sending that information to Facebook. The user can opt out by clicking on text that reads “No, thanks.” If the user doesn’t, the next time they visit Facebook, the user will see a message from Facebook asking for permission to show the information to their friends. If the user declines, the information won’t be sent.”

Phil Windley from ZDNet has a great conclusion to the whole fracas: “Facebook realizes that simply relying on the targeted ads of the past won’t garner much attention and that they have a tremendous asset in the social graph within their system. Facebook Beacon is an attempt to capitalize on that by using the social graph to make advertising more useful for the customer and more profitable for Facebook. Unfortunately, they got it wrong. Instead of advertising, they should have focused on recommendations. No one is going to say “please show me more ads based on what my friends like.” But plenty of people will ask a friend to recommend digital cameras or books to them.”

Update: Peter Kafka (at Silicon Alley Insider) offers Facebook two solutions to resolve the situation. “The short-term solution: Turn off Beacon until you can make it fully opt-in. The long-term solution: Let users sign up for Beacon via Facebook, and give them a reason to do so.”