Is there any evidence that Facebook surreptitiously listens to conversations? I could see mining the ambient content of any Facebook video/VOIP sessions, but beyond that I can't see it being true.
Facebook location services can be genuinely creepy though. Earlier this year I enabled location services on the app (while keeping location history disabled), and it would suggest anyone in my phone's proximity using Facebook. It even suggested the attendants at my local gas station, and nurses at my doctor's office. Neighbors too, but only the ones in the same building (~75ft). I suspect this was due to my friends list numbering in the single digits at the time, since I'd otherwise neglected Facebook since its inception.
Then, I took a brief vacation and added a bunch of new people. The creepy location telepathy suddenly vanished. Ever since, all it's been suggesting is acquaintances of said people, despite the fact I live thousands of miles away with location services enabled 24/7. So, I guess Facebook can be as dumb as it is smart sometimes.
The notion of a private investigator (or psychotic stalker) buying a cheap smartphone, installing FB on it with a clean account, enabling location services, muting it, attaching an external battery and dumping it in a bush somewhere unfortunately seems feasible. It strikes me as a good experiment for a security researcher to conduct.