Last week, Facebook rolled out its very own location-based service, Facebook Places.  In Palo Alto, California, Facebook CEO Mark Zuckerberg had a few words to say on the launch of this new service:

“This is going to be a really fun and interesting summer,” said Zuckerberg at the start of the evening. “We’ve got a lot of new products coming out.” The first of these new products — Places — is a smartphone-based service that takes on much of the functionality provided by existing services such as Foursquare and Yelp.

In other words – Foursquare, you’d better be ready for a battle of epic social proportions.

As with other location-based applications, Facebook Places is designed with a few simple goals in mind:

1. Help people share where they are, socially.

2. Let people see who is nearby.

3. Let people discover new places through their friends’ profiles.

Foursquare, Yelp!, and Gowalla have been consistently picking up steam, and it only makes sense that social giant Facebook would get in on the action. We know that people like these services – but the real question is, how quickly is Facebook going to decimate the competition?

With more than 500 million users already on Facebook, Places has a massive potential following. Although not every user will adopt Places, in a few weeks, as the brave begin to check-in to their favorite theaters and restaurants, there’s a (better than) good chance that a massive domino effect will start rippling throughout Facebook.

What do competitors need to stay afloat?

It’s simple, really – offer value above and beyond what Facebook can offer right now with extra features.

Gowalla may stay ahead of the curve, since its GPS “game” is a scavenger hunt. As people check-in to different places, they receive souvenirs. It isn’t simply a social check-in service, rather a program that people use to compete against each other using their smartphones and gas money.

Yelp!, and its already large database of user reviews, might be able to keep up momentum as well. The user following is already strong, and the focus on reviews is key. The addition of check-ins is relatively new to Yelp!, so knowing the location of friends is already a non-priority for these users.

The location-based giant that’s in Facebook’s sights is Foursquare, which has been the leader in location-based services. But that may not last for long. Foursquare has the least amount of differentiation from Facebook Places since goals and features are essentially the same. You check-in to different locations, share this information with your friends, and collect badges for different types of check-ins and achievements.

Although Foursquare plans to beef up its program with additional features, tips, to-dos and specials, the company should still be wary. Unless Facebook Places proves to be a clumsy, clunky program… Foursquare has some serious competition to worry about.