FAQ 102 (custom friends groups) currently says, under security:
By default, friends groups are private, so no one but you can see their names or members. However, you can select a group and click the "public" button to allow other users to filter your Friends page according to these groups. If you make your "Default View" public, then visitors to your Friends page will only see entries from members of that group, instead of all your Friends.
When I see a construction like this -- By default, foo; however, bar -- I tend to interpret it as bar contradicting foo in some way. (eg: By default, entries are public, so anyone can see them; however, you can use security options to make them FO/private, so they are restricted.) Which kind of makes it sound like if you set a group "public", other people can see names/members.
I know it's nitpicky, but I'd kind of prefer to see some distinction between viewing names and using the filtering version. Something like: By default, friends groups are private, so [link]filtering your Friends page[/link] will only work for you and only when you are logged in. However, you can select a group and click the "public" button to allow other users to filter your Friends page according to that group. If you make your "Default View" public, then visitors to your Friends page will only see entries from members of that group, instead of all your Friends. Regardless of the security settings, you are the only one that can see a list of your groups or their members.