Here's the scoop, courtesy of the Consumerist blog, which initially broke the story thanks to a reader tip:
"Facebook's terms of service (TOS) used to say that when you closed an account on their network, any rights they claimed to the original content you uploaded would expire. Not anymore."
"Now, anything you upload to Facebook can be used by Facebook in any way they deem fit, forever, no matter what you do later.* Want to close your account? Good for you, but Facebook still has the right to do whatever it wants with your old content. They can even sublicense it if they want."
So essentially, Facebook said, it could retain archived copies of your user content. Reportedly, the site updated the term of use on Feb. 4. So now, Facebook is going back to its old terms of service.
I also found this Consumerist list very helpful: