Xbox.com:

After the software update to Xbox in early December, you will be able to meet new friends by browsing the Friends lists of other Xbox LIVE members. You can determine who can see your Friends list now on this page – Everyone, Friends Only, or Blocked. You will be able to check your status and change your Friends list setting anytime after the software update in the Account Management section of Marketplace on your Xbox 360 or My Xbox on Xbox.com.

The default setting for who will be able to see your Friends lists depends on your age:

Adults – Everyone

Teens (13-17) – Friends Only

Children (under 13) – Blocked