It depends on who is posting the photo. If I post a photo of my nephew and tag him, it will show up on his wall. I have my privacy setting that only my friends can see my photos. So his friends may see the thumbnail picture on his wall, but if they click on it, they should not be able to see the actual photo. (unless they are on my friends list).
Your friends can see photos that you post, but if other people post a photo and tag you in it, it doesn't mean your friends can see it just because you are tagged.