Austin-based Gowalla launched in 2007, but lost the battle to its direct competitor: Foursquare. The company tried to reinvent itself as a travel guide, but failed. Facebook was not interested in, and did not acquire, Gowalla's user data: it was a talent-only acquisition.
Most of Gowalla's employees, including co-founder Josh Williams, moved to Facebook's offices in Palo Alto (so they're likely in Menlo Park now), while the rest stayed in Austin to work out of Facebook's local office there. The team is helping with Facebook's new Timeline profile.
Rumor has it Menlo Park made the purchase in exchange for $3 million in Facebook shares. The deal was reportedly done with full board backing and the majority of Gowalla investors were apparently okay it being made entirely in Facebook shares. This is probably because Facebook shares are very likely to be more profitable moving forward given the social networking giant's upcoming IPO.