Facebook Application

So I just learned about applications on the blog from google..and I added the Facebook one you see to the side. I was a little disturbed that it shows you my friends updates without them knowing..so I logged out thinking it would change when someone visits the page and isn't logged in...but I still saw it..if it still remembered it was me and didn't work right that is one thing. If not, then I think that application is a violation of Facebook's privacy policy. Comments?