From the “The Fight for Fallujah – TF2-2 IN FSE AAR: Indirect Fires in the Battle of Fallujah” in the March/April ‘05 edition of Field Artillery Magazine :
The use of white phosphorus is not specifically banned by any treaty, however the 1980 Convention on Conventional Weapons (Protocol III) prohibits the use of incendiary weapons against civilian populations or by air attack against military forces that are located within concentrations of civilians.  The United States is among the nations that are parties to the convention but have not signed protocol III.
“The munitions we brought to this fight were . . . illumination
and white phosphorous (WP, M110 and M825), with point-detonating (PD), delay, time and variable-time (VT) fuzes.”
“WP proved to be an effective and versatile munition. We used it for screening missions at two breeches and, later in the fight, as a potent psychological weapon against the insurgents in trench lines and spider holes when we could not get effects on them with HE. We fired “shake and bake” missions at the insurgents, using WP to flush them out and HE to take them out.”
This according to Captain James T. Cobb, First Lieutenant Christopher A. LaCour, and Sergeant First Class William H. Hight, the authors of the article. Their article fundamentally disagrees with the statement by the U.S. State Department on the matter.
There are also numerous reports from embedded journalists that WP was fired on Fallujah, such as this one from the North County Times:
“Bogert is a mortar team leader who directed his men to fire round after round of high explosives and white phosphorus charges into the city Friday and Saturday, never knowing what the targets were or what damage the resulting explosions caused.
The boom kicked dust around the pit as they ran through the drill again and again, sending a mixture of burning white phosphorus and high explosives they call “shake ‘n’ bake” into a cluster of buildings where insurgents have been spotted all week.”
I don't know all the details about Protocol III and I am no lawyer but a nation that wants to claim the morale high ground has absolutely no business using such a weapon against combatants or anyone else. If you want to read more about WP here is the Wikipedia entry.
I am just disgusted.
Update #1: For and impassioned take on this story you can't go wrong by reading Hunter's diary over at Dkos.