The Activity Log is a reverse-chronological list of everything that has been linked to your Facebook page, including your posts and pictures and likes, tags of you, your comments on other people's Timelines, and posts created on your behalf by the apps you use. For each item, you can choose who sees it on your Timeline. You can also "Unlike" an item here by clicking the pencil icon on the far right.
These changes apply to individual items, not to the settings of applications. To change application settings, select the app from the list in the left-hand navigation and then change the sharing setting(s) at the top of the screen.