You will need to create a Facebook Application for your website at http://facebook.com/developers. This provides an Application ID which is required by the Block to interface with Facebook.
Most of the settings in the Application setup are not required, however you will need to give your application a name (generally the same as your website) and provide the details of where your site is located (the Site URL).
When adding the block to a page, you will need to provide your Application ID. You can tick the box "Set default" next to the Application ID to automatically use this Application ID in future.
Click the 'Login to Facebook' button to login to Facebook and load your albums. Select an album you would like to use and confirm it is the correct album using the Album Preview.
The default view for the block just provides a page of thumbnail images with no further functionality.
Two custom templates are provided which use popular Javascript gallery viewers, AD Gallery and GalleryView. These are provided as a template that you can expand upon for your individual requirements.