The question now is exactly what this location sharing will look like. I’ve heard that Facebook has tested simply attaching location data to user status updates, similar to the way Twitter does it. According to the report, Facebook will also offer an API to third parties, presumably allowing services like Foursquare to send their location data into Facebook (it’s unclear if data will also flow the other way, but I suspect it will once Facebook can get the privacy settings right).
Perhaps the most interesting part of the Times piece is the assertion that Facebook isn’t looking to beat Foursquare, Gowalla, and similar location based services — something that I believe it could easily do if it wanted to. Rather, it’s looking to beat Google in the small-business advertising space. The Times report doesn’t say much on how exactly Facebook is going to do that, but I suspect it will involve getting as many third parties as possible to integrate its API.