I\'ve been writing a game for Facebook using Rails and jQuery. Since I started using the Facebook Javascript SDK, using localhost as an app domain seemed to work just fine.
For everybody who is fidgeting with this in 2017. The interface changed again. I wanted to comment this to the answer but I don't have enough reputation. The localhost url of your app now has to be copied to three places. Currently, (October 26th, 2017) the sequence is:
1.) Click "Settings" in the left menu.
2.) In the center under the first box of options, click "+ Add Platform" and choose "Website" (or whatever is appropriate for your app.)
3.) In the box that comes up for the website you just added copy your localhost site url (f.e. http://localhost:3000/)
4.) In the box above that "App Domain" copy the same URL
5.) At the bottom right - click "Save Changes"
6.) In the left menu under "Products" click "Facebook Login" (or add it via "+ Add Products" if it is not available)
7.) You are now in the Facebook Login settings. Copy the same url to the field "Valid OAuth redirect URIs"
This should work.