Facebook announced its much awaited location-based feature called Places at a small press event yesterday, which allows you to share your location with people on Facebook.

Facebook followed up the announcement by releasing an updated version of their iPhone app that incorporates this new feature.

Here is how the feature works:

• Go to Places on the iPhone application and then tap the "Check In" button. You'll see a list of places near you. Choose the place that matches where you are. If it's not on the list, search for it or add it. After checking in, your check-in will create a story in your friends' News Feeds and show up in the Recent Activity section on the page for that place.

• When you check in, you can also tag friends who are with you, just as you can tag a friend in a status update or photo. You can post an update along with your check-in to tell people more about what you are doing.

• In the "People Here Now" section, you can see others who are checked in with you at that place.

Facebook seems to have learnt from its mistakes when it comes to privacy and has taken care to give users control over how much Places information is shared with others. Here are some user controls:

• You choose whether or not to share your location when you check in at a place. When you check in, you can tag friends who are with you but only if their settings allow it. When you are tagged, you are always notified.

• Only your friends can see when you visit or are tagged at a place, unless you have specifically set your master privacy control to "Everyone." You also have the choice to set more restrictive customized settings.

• When a friend tags you through Places, you will receive a notification on Facebook and on your mobile device. The first time this happens, you'll be given the choice to allow your friends to check you in to places. 

• When your friends check you in, it is as if you have checked in at that place yourself. You also will appear checked-in to your friends. If you do not allow friends to check you in, then when they tag you at a place, your name will appear in the same way it appears in a tagged status update. You will not appear checked-in at that place.

• You can always remove any Places check-in or tag using your mobile device or on the web. It's like removing yourself from a photo tag. You also have the choice to turn off the ability for friends to check you in at Places. Go to your Privacy Settings and turn off the setting to "Let Friends Check Me In."

Places is currently available only to users in the US and Facebook hopes to make it available to more countries soon.

The new version of Facebook’s iPhone app also includes privacy option on status updates. So you can choose between making it public and restricting it to friends while posting a new message from your iPhone.

You can also see the recipients from of a Facebook message in your inbox. The messages section also gets the popular "pull to refresh" feature that was first seen in Tweetie (now available as Twitter for iPhone).

New Facebook app finally supports background photo and video uploading feature that was introduced by Apple in iOS 4.

Some jailbroken iPhone users had reported issues with the new version of Facebook app (v3.2). They have reported the following issues:

• You get the “Unable to Load This Page” error message anywhere you launch the application.

• You get the “Error – sorry there was an error” message while trying to load Places.

• You get the “Login Failed – Unable to Connect to Facebook” error if you’re trying to log in to the application.

Facebook has just released a new version v3.2.1 to fix bugs but it doesn’t seem to fix the issue observed on a jailbroken iPhone.

The new version of Facebook seems to have some compatibility issue with jailbreak app – BiteSMS as uninstalling it seems to fix the issue.

Facebook has been one of the most popular application on the iPhone and the Places feature gives users another reason to actively use the iPhone app.

What do you think? We would love to hear your feedback on the new features, so please feel free to drop us a line in the comments.

[via Facebook blog]