Not only is it painful to configure, but it only works with their desktop Web client. Mobile phone users can talk to everybody or nobody.
That said, it's surprising how few people, even tech savvy ones seem to know about the functionality even though it's been around for ages. In fact, FB used to have a "how do you know this person" question when you added a friend, and they confirmed the relationship when they accepted, which is gone. It could be that they believe that most users don't want to segment their friends by categorizing them.