Promotions on Facebook basically CANNOT use any Facebook functionality. So you cannot ask fans to tag themselves, comment on something, check in somewhere, 'like' something, etc, to enter the competition. So those competitions where the picture with the most 'likes' is the winner? Totally against Facebook's rules.

You also cannot tell people they've won the competition through Facebook, either by tagging them in posts, sending them a private message etc.

You must also make sure your fans know they are giving information to YOU and not to Facebook, and that the competition is not affiliated with Facebook in any way. This seems obvious, but I've never said this in a competition either.

So how CAN people enter? And how can you let people know who's won?
Facebook allows entries via any apps which connect with Facebook. Now, I'm quite good with html and stuff, what with my brother being a programmer, and I can't work out exactly how to write one, and I have neither the time or the inclination, so I'm guessing most of the people reading (crafty so and sos as you are) probably won't be able to either.

So how else can I have a promotion?

The best, and most used way, is definitely to have a blogpost running the competition. Blogs are a great free promotional tool, and allow a lot more scope for promotion. A great example of this are these posts by my friends Kim and Peach - both give you more than one way of entering, and you don't have to break Facebook's rules to enter either competition (you have the option to 'like' Peach's page, but the main way of entering is via a comment on the blog)

Posting about a competition you're holding off-site is, of course, totally fine with Facebook. It also gets round the whole 'this competition isn't affiliated with...' and 'this information is being given to...' bore-fest. Your blog followers should know who they're giving information to, and if they're not totally braindead, they know you're not affiliated with Facebook. As far as I can tell, Twitter don't mind you posting links to competitions off-site either, so go ahead and post on both sites. (as a side-note, I know nothing about Twitter, but that is next on my list for working out what works, what doesn't, what people hate, and most importantly the rules given by the site itself.)

So why is all this important? Well, a friend of mine found out why this week. You break their rules, they'll find out. Notice how Facebook knows what you're posting about, and tells you who else is posting about this? They no doubt have a mechanism in the programming which tells them everyone posting about 'enter my competition' and checks them all out. This is a big business, we're all small businesses, and no matter how insignificant we seem, they're on top of us all.

If you're a burlesque dancer, you'll probably know exactly what I mean. If you have your stage name as your profile name, you're in danger of getting deleted. If you have a photo of you wearing pasties (that's right, showing ABSOLUTELY nothing more, and considerably less, than you'd find in many men's magazines and newspapers, and your photos will probably get deleted.

In a nutshell, if your page gets deleted, there's very little you can do to get it back. You lose all your fans, all your photos, everything. Plus if it's your profile which gets deleted, then ANY fanpages of which you are the only admin will also be lost. (as a sidenote, I recommended having two admins on any fanpage last time I spoke about Facebook, and I stand by this!)
So from now on, all competitions will be held on here, and I'll also be taking a tip from Kim and incorporating a competition into an interesting article instead of just saying 'enter my competition' - as usual I'm learning all the time, and I'd hate to see any other small businesses lose their fanpage through ignorance.
N.B. Facebook's definition of a competition, and of a sweepstakes - "By “contest” or “competition” we mean a promotion that includes a prize of monetary value and a winner determined on the basis of skill (i.e., through judging based on specific criteria). By “sweepstakes” we mean a promotion that includes a prize of monetary value and a winner selected on the basis of chance."