I think they cater to both types. They want to make existing social connections stronger but they also want to create them.

I think it makes a lot of sense for Facebook to implement a feature which lets you friend people physically near you. There have been people I have never talked to but simply seen around who I found on Facebook and became friends with in real life, but otherwise wouldn't have without Facebook.

This form of social interaction may not interface well with yours, but it doubtless does for others. Given that Facebook's business model is to appeal to as many people as possible, and features like this don't cause any notable quantity of people to discontinue using the service, it makes sense.