The New York Times features an in-depth article on the start-up Social Intelligence which helps human resources do deep background checks on possible hires. They scour the web, looking not just at social networking sites, but all sorts of sites such as Craig's List or Flickr, to see what sorts of things might be revealed about the applicant. The applicant is first asked if he or she consents to a background check. (Don't be a fool! But what will it say about you if you refuse?!) Also, the individual is shown the results of the search before it is reported back to the potential employer. And apparently the searches shouldn't cover the sorts of questions that are out of bounds for an employer to ask in an interview (Like, are you married? Do you have children?)
The biggest problem for young people is that they cannot control what others put up on the Internet. If a friend posts a picture of them, even if they ask very quickly for the photo to be taken down, it already may well have been duplicated and shared across the web in places they know nothing about. It is very difficult for "digital natives" to control images in particular, though they can certainly be circumspect themselves.
The best rule is not to post anything online that you would not want published on the front page of a major paper. Sadly that flies in the face of the current youth culture!
The article in the Times recounts several examples of people who failed to get a job because of "dirt" uncovered by "Social Intelligence." There was a woman who applied for a job at a hospital, but the company found nude photos she had posted at an image sharing site (well, the article made it sound as though she had posted them). The Times also reported another applicant who was using Oxycontin, as found through Craigslist. They don't talk about photos of wild parties, but I am sure that is something that employers don't want to see.
On the other hand, perhaps, by looking on the Internet, the company will uncover evidence that will support your resume's list of awards and even have nice comments from colleagues or teachers or peers about your abilities (we can hope!). That's the nice little carrot that Social Intelligence holds out to applicants at their website.
Photo of a bloodhound is courtesy of http://dogsranch.com/the-bloodhound.html/bloodhound