"We've designed Facebook to provide relevant and interesting advertising content to you in a way that protects your privacy completely. We also protect your privacy by virtue of the way our advertising system works. Because our system chooses which ads to show you, we don't need to share any of your personal information with advertisers in order to show you relevant ads. In order to advertise on Facebook, advertisers give us an ad they want us to display and tell us the kinds of people they want to reach. We deliver the ad to people who fit those criteria without revealing any personal information to the advertiser," stated Sheryl Sandberg on Facebook.
The video shows how this works: