How does Facebook make money?

This was the subject of discussion in a gathering last Thanksgiving night. Facebook was recently "over" estimated by a private equity research firm to have market value of $41 billion, more than eBay ($39.1 billion) one of the largest e- retailers in the United States and much more than Yahoo which is valued at $21 billion. What I am trying to understand is that the current market value is based on it's revenue and future revenue predictions or just a shot on its popularity and web traffic. I must confess that I haven't got chance to read the book The Facebook effect yet even after many strong recommendations from my friends, but I have kindle now and I will be travelling soon. So this book should be the way to ease the pain of  long security lines and evasive TSA scanning radiation.
Facebook's 2010 revenue is totally a speculation, but 2009 revenue was about $500 million which were reported coming from these sources:

• Self-service ads, which appear on the right side of the screen on Facebook, fetched about $250 million to $300 million.
• Engagement ads, which seek user-interaction (polls and sometimes feature user-endorsements), brought in $100 million.
• $50 alone came from a deal with Microsoft under which Microsoft sells some adds on Facebook. After all Microsoft owns 1.3% of Facebook which is $533 million if you believe its current evaluation.
• Facebook gifts and other virtual goods account made whopping $30 million to $50 million

Based on 2009 revenue and the number of growing user base (almost half a billion now), analysts are predicting 2010 revenue anywhere between $800 million to $1.28 billion. Michael Arrington of techcrunch in his blog citing some insider info and his research even claimed that the revenue could reach $2 billion. If revenue tops One billion dollar, it can create some ever lasting impacts. Google crossed $1B in 2004 the year it went public and in next two years they crossed $10B. Facebook's soon to be billionaires include  its founders, angel investors and some early employees. What happens to its 2010 revenue yet to be seen, but Facebook's popularity has definitely made a lot of friends and foes in tech industry. Big M is using its friendship with Facebook to fight big G. Us trademark office has already allowed Facebook to copyright the term "Face" I think, as long as Facebook offers something new to its users to avoid boredom, it can maintain its popularity as primary social network platform. I am waiting to see its new messaging platform in action.