I've been playing with the new Apple iLife and have been very impressed how well the face-tagging feature works. The picture above was after the software had learned maybe half a dozen examples of my family. The maths and programming degree I did in the eighties had quite a large slab of pattern-recognition (automated speech recognition was my thesis project) and I remember being taken to see a system the MOD were playing with in 1986 - they had either deployed it (or were going to) at Greenham Common (remember that!) - I think it was called Wizzard (or something like that). It was pretty impressive and it ran on a network of PDP-11s!
Anyhow - below is a paper I had to read for my degree about early efforts in face recognition;
M. Nixon, Eye Spacing Measurement for Facial Recognition, Proceedings of the Society of Photo-Optical Instrument Engineers, SPIE, Vol. 575, No. 37, August 1985, pp. 279-285