This has been available for several months now. To answer a few questions I've seen, it uses a typical captive portal approach, so an unencrypted WiFi hotspot. Upon connection, you are redirected to an encrypted site with embedded Facebook account verification, at which point you can go wherever the Internet service lets you. The router typically has content filtering and also tracks Internet usage (bandwidth, visited sites, etc) as well as limits on visit length etc.

It is a useful option for merchants, as customers expect WiFi for free. Further, they expect it to be fast and that doesn't expose them to security risks. In other words, this gets expensive and difficult to manage. There are great solutions out there already, but they cost money - so the business case is based on marketing data. Email authentication would work, but it is difficult to gain much insight about customers, also you would need to give people access to their email server to setup their authentication. SMS doesn't work for people who don't have cell phones, or if there is poor coverage - also marketing data would be very difficult to gain. So, Social Media authentication (Facebook) turns out to be a really great option.

Obviously you have the choice not to use the service, but this isn't going away. Industry codes of conduct need to be set and I don't think they have. Privacy laws need to be understood and enforced. Retailer and coffee shop activities with this data haven't caused me much concern, but Facebook is another story.