Default = 'Share with everyone' = fail.gif
The main problem with the 'transition tool' - a.k.a the screen which says "Update your privacy settings" - is that by default, there are NO privacy settings applied! See the screenshot below, which shows that all of the settings are defaulted to 'Share with everyone', as opposed to 'Old settings':
Which means that anyone who just clicks through it (or assumes that the default configuration will leave their privacy unchanged) suddenly finds they're sharing their teddy bears with the world. Zuckerberg, despite his protestations, is clearly a very public victim of this.
For a company who have so fundamentally failed to get a grasp on privacy, I guess we shouldn't be surprised that they missed something as fundamental as defaulting to the user's old settings, rather than defaulting to revealing everything to the world.