Facebook finds people you might know based on when you graduated, who's friends with the people you've already added, etc. You join networks based on schools or regions, and only people in those networks or your friends can view your profile (in fact, you can limit it to friends only if you want, as you can with MySpace). Facebook is pretty good for keeping in touch with people from high school, college, work, cousins, etc., and I know some older people who have it too. You have to scrounge around if you want to find people you know on MySpace. It's easier to find people you don't know on MySpace though if that's what you're into. Facebook (and now MySpace to a lesser extent) gives you updates about what your friends do on the site, and gives your friends updates on what you do. Facebook is fairly clean and functional, and you can add applications (third-party, but found through the site) to your profile if you want to muck it up or add some sort of functionality. Facebook has a fairly nice built-in chat function.
MySpace gives you a bit more freedom as far as how you can modify your page, but like others said, this can be a bad thing. MySpace is much more open, e.g., you can see most people's profiles. There a lot of fake/advertisement pages and more ads. Overall, the IQ seems a bit lower. MySpace has band pages, movie pages, etc., which I don't think Facebook has. The MySpace site itself gives a lot of errors from time to time.