I just got one of these last week. A guy I know died suddenly in a car accident, and his fiance and parents made a Facebook event for his funeral to let everyone know. I think that these days it is just so much more efficient. Within 2 hours of posting the event there were already 50 responses (yes, no, or maybe) and several people posted offering their condolences even if they could not make the funeral. I went to the funeral and there were almost 500 people there. That was tremendously comforting to his family, and I'm not sure all the people who wanted to be there would have known if not for Facebook.
I know that finding out about deaths on Facebook is not always appropriate, but once you know about the death and are waiting to hear about funeral arrangments, it just seems logical since so many people (of all generations) are on Facebook. To me it seems less crude than posting an announcement in the paper, since the Facebook event is only sent to those who knew the deceased or their family. (FTR, I don't think there is anything wrong with posting in the paper.)