While we don't know the details of their discussions, it makes sense that Apple may have wanted to build Ping as a music-tracking and sales service on top of Facebook's social graph. This could have allowed Apple to get what it wanted out of the relationship -- more iTunes and iPod sales -- without having to build a social network from scratch.
According to Steve Jobs, Facebook was insisting on "onerous terms that we could not agree to". Instead, Apple launched the service on its own and tried to implement the Facebook "Connect" login interface; however, Facebook blocked Apple citing the enormous amount of traffic Apple would generate.
Interestingly, Facebook is also rumored to be building its own phone to counter any long term threats from Android or iOS to its social network.