Question about Facebook privacy?

[Anne]

I've noticed that when my friends like one of their friend's photos, that photo shows up on my news feed, even though I am not friends with the owner of the photo. Is that only because they have it on public? If I have my settings on Friends Only, can my friends' friends see my stuff if our mutual friend likes or comments on it? Thanks!
But doesn't that negate the point of privacy settings?

[abraXus]

your friends' friends can still see your stuff when your friends comment on your stuff, even if you have it set to friends only - people do not seem to understand that privacy on facebook isnt what they expect