Cannot STAND McAfee... It was what killed my A31 when I first got it forcing me to reinstall XP
But I see the problem on here, you can't really let a website which has 350,000,000 users have spam and malware on it - there seems to be a lot of spyware & malware around at the moment.
I'm not on Facebook btw.

It's not really a question of Facebook itself being infested -- if they were, that would be headline news, not a blog note. Instead, if I get this right, Facebook is trying to reduce hassles to themselves resulting from users having malware on their own machines, which might then spam the site from the users' accounts (posting "hey check out this URL" on friends' walls and so on) and generally be a nuisance.

Personally, I do not have a Facebook account, but my wife does. A couple of months ago I was alongside her while she was using Facebook. Suddenly she got one of these pop-ups from "Microsoft Security Center" [not really] that said a scan of her computer showed her computer was infected with viruses and she should click on "OK" to remove them - at a price. Alarmed, she showed me what she was looking at. There was a Javascript dialog box that she was supposed to click on. I did not trust even clicking on the X in the corner of the Javascript box to close it. I couldn't close it with a right-click, so I closed the browser (I.E.) from a right-click on the taskbar icon.

After the above episode, I performed an online virus scan and a virus scan in Safe Mode. There was no indication of infection. It appears I was successful in keeping the malware from installing.

So does Facebook have malware? Well, perhaps not Facebook itself, but perhaps an individual's page on Facebook or the ads on Facebook do.

You were lucky. I've had this happen on several occasions (not while on facebook -- I don't use that -- but while on other sites), and it's hit or miss. Sometimes I've successfully avoided the malware the way you did. At other times, I've succeeded by ending the task in Task Manager. Still, at other times, even Malwarebytes, SuperAntiSpyware, and Trend Micro weren't able to remove the malware once it showed up on the monitor. At that point, my way of fixing it has been to reinstall XP.

Right -- the third-party apps are unfortunately the principal danger on Facebook because there is little preventing them from serving up malware. They will be shut down when discovered, but that might obviously be too late. They still depend on either tricking the user into permitting executables to run (merely clicking 'ok' in a javascript prompt wouldn't) or exploiting a browser flaw, but that's not so difficult, especially with older versions of IE and people who use them.

There are lots of rogue versions of Microsoft Security Essentials that don't remove malware but actually install it, be careful.