Facebook is like an online forum (or community) which you can restrict to a selected group of people. There are a lot of extra bells and whistles which I find somewhat annoying, but the basic core function is pretty nice.
You basically create an online representation of yourself including a profile and picture galleries and videos and other tidbits. Then you search out other people on Facebook who you want to give access to your little online world (your "friends").
It also allows you to create sub-pages associated with your account which you can promote. So for example, if you have a home business selling jars of spiced honey or something, you can create a "Page" for that business and then promote it to your "friends" with links from your page.
Facebook accounts are considered part of a "Social Network" and social networking is becoming a big marketing trend. Most people use the Facebook accounts simply to communicate "en masse" with everyone in their collection of friends, but there are other inherent functions as well. Like most things on the web, it's evolving rapidly.