Also see the update on Jan 5, 2011.
Facebook has been changing a lot since this March and they still keep changing. Have you ever noticed the above setting in the red box?
You can find this setting at your personal profile page. Go to your profile, locate the "Share" button. Right below it, click on "Settings," you will find the above settings circling by the red box.
If you change the setting for "Who can see posts made by friends?" to "Only Me," the check box for "Posting Ability" will be grayed out and become unchecked. It means no one or application can post anything to your wall. Unfortunately you won't notice this change unless you immediately refresh the page and then go back to the same location to check on it. Or you may know this problem when someone notifies you.
These above two settings are supposedly corresponding to the settings at your privacy settings page. Again, it is confusing. After the changes made from your profile page, if you go and check your privacy settings page, you will find this confusing settings as shown in the following picture.
The check box for "Friends can post on my Wall" is still on (checked) while "Posts by Friends - Control who can see posts by your friends on your profile" is set to "Only Me."
Because the second setting is set to "Only Me," no one but you can post to your wall. Thus, if you allow your friends to post something to your wall, please make sure "... [W|w]ho can see posts made by ... friends... " is set appropriate in your profile page or your privacy settings page.
I personally don't understand why Facebook still doesn't want to change or amend this wording "... who can see posts made by ... friends?" to make things clear.