I personally had an experience where a college student applied for a job at my company, and when I looked her up in Facebook (little did she know that an "old" person like me would be on Facebook). When I searched for her, I found a group on Facebbok called "NAME is a drunken kleptomaniac". Now, I was a nice guy and let her know that Facebook extends beyond college now. And to her credit she got the group deleted within a day and apologized. She ended up getting the job - probably because she actually rose to the occasion and handled herself well.
Here is an article about how Facebook Can Kill A Career that I loved.
An excerpt is below, but basically someone claimed to be sick from work, but then some crazy photos showed up of the same person partying. At least his boss had a sense of humor. See the email his boss sent below.
From: Paul Davis (North America)
Sent: Thursday, November 01, 2007 4:54 PM
To: Kevin Colvin; Jill Thompson (North America); Kevin Colvin (North America)
Thanks for letting us know--hope everything is ok in New York. (cool wand)