The core technology for the Xbox Facebook service is Facebook Connect, which links logins for different programs and sites (such as Digg) to a Facebook user profile. On the 360, it'll link your Facebook profile to your gamertag. From your linked Xbox Live profile, you can look at friends' Facebook profiles, update your status and look at pictures you and your friends have posted. In addition, if you accomplish any incredible in-game feats, you can update your Facebook profile to let your friends know of your achievement.
It's not entirely clear how this will work. In the Microsoft media briefing, Felicia Day showed a screenshot from Tiger Woods PGA Tour 10 which she could then push to her profile using the Xbox Facebook functionality. Davis explained that the screenshot functionality is built into PGA Tour 10 -- it's doubtful that you'll be able to share screengrabs with friends on most titles that don't possess this feature. Still, if you're the bragging type, it sounds like the process to post your accomplishments on your profile will be quick and harmless.
Another feature Davis described was the ability to find which of your Facebook friends are also linked to gamertags, and add them as friends on Xbox Live. This sounds like the main method the social networking behemoth is using to "[power] the Xbox Live social graph with Facebook," a goal it could ostensibly obtain if the process is seamless enough. Aren't you curious how many of your real-life friends are closet Left 4 Dead junkies?
Then again, should you want to keep your love of online shooters hidden from your peers, you'll be able to do that too. According to Davis, "Facebook has always been very concerned with the privacy of its users. We're very careful about it, so we'll present the user with the option to change their privacy settings."
Now, here's the bad news: The oft-requested clan and group functionality that Xbox Live users have been requesting since the service's debut won't be present in the Xbox Facebook service. The social site's Group functionality would go over swimmingly if implemented on Xbox Live, but it sounds like any other Facebook capabilities not listed above -- that includes applications, notes, video, etc. -- won't make it onto the console service.
Still, it sounds like the service will help you find more Xbox Live friends, provided you've made a few friends in real life. Now, if someone could come up with a program that helped us do that, we'd be all set.