This seems wrong. People have been giving details about their lives to their doctors, lawyers and priests for centuries, relying on convention that they keep it private. Why we cannot continue with the same convention in Facebook age?
Giving your details to Facebook is the pre-Facebook equivalent of putting an ad in the paper with your details. You're not just giving your details to Facebook, you're giving them to everyone who has access to your page.
Of course, this won't prevent the NSA from doing what it has always done: "We're snooping. No, you can't tell the user. No, you can't do anything about it." but that is another issue, one that we can hopefully resolve with a bit of legislature and oversight.
I think people just want to communicate with each other, and the Internet is the best way to do that right now. If we can build an Internet where we can easily do that without giving all this data to 3rd parties, people would use that, but until then they don't have much choice.
As Schneier says, advising people to "quit Google" or Facebook, is not really a choice in today's Internet. But if developers and the architects of the Internet realize what a problem this is, then maybe we can come up with other more secure alternative solutions.
Essentially, we're going back to computers in the house doing everything, since the network can't be trusted, and encryption can't be trusted.
Granted some data you put on facebook you obviously intend to make public or semi-public but not necessarily all of it.
Some countries have laws that limit the use of the information in public records. Even if some party is allowed to collect the information, like phone company, they are not automatically allowed to use the data in any way they please.
There is also huge difference of having access to data you need and keeping and collecting records of people using publicly available data.
US has very backwards privacy laws. Basically once your data is out there anyone can do anything they please with it. This does not mean that this should be the case or that rest of the world acts like this.
It's not convention. Those conversations are privileged (literally 'under private law' and the notion is relatively recent in legal terms. Until 1840, for example, a lawyer in Britain was not expected to defend a client that he knew to be guilty.