Personally, I make extensive use of Friend Lists. I have a list for friends from High School (10+ yrs ago), a list for people from my church... one for my family (aunts, uncles, cousins, etc)... on for my wife's family... one for immediate family.... one for close friends and people I have some basic trust in... and one for people I don't know at all but added to gain some advantage in a FB game. My default postings are only visible to immediate family and close friends only. This includes anything from Gowalla and Foursquare. When I'm posting something, I have to make a conscious decision about if I want to share that information with more than just that small group. It has resulted in instances where I posted something to the small group and had to delete it and repost so I could expand the visibility, but it has never resulted in my accidentally posting something that I'd rather not have seen by high school acquaintances I haven't seen in more than 10 years or the more questionable members of my extended family.
Of course very few people actually go through that much trouble. Most think they're doing pretty good if they set their default post privacy to "friends only"... which is better than "Everybody", for sure, but still assumes you can trust everybody on your friend list.