According to the above article, 10% of "prestigious university" admissions officials look on social networking sites to get information about a student. While i've heard that some employers do this, I think admissions officials doing likewise is a bit silly.
For some, getting into college is a by-any-means competition, so in order to avoid a disadvantage they delete their Facebook or Myspace profiles, or whitewash them. In recent times, Facebook has wisened up to this extra screening and added sufficient privacy controls so that content can be restricted to a certain subset of people you authorize.
So essentially it is more a screening of who has a better understanding of privacy settings, and by extension, who has more technological savvy. Perhaps there are better ways for colleges to judge such proficiency, like ... AP test scores! Personally i'd use external achievements (open source contributions, competitions, pro bono help) as a better indicator of initiative and technological whizbang.