Formaldehyde, most commonly associated with embalming fluid, is a known carcinogen. Its highly toxic nature makes it an effective preservative in cosmetics, too. While it's not typically listed in an ingredients list on its own, a number of preservatives work by slowly releasing a steady stream of formaldehyde in to the product. Common cosmetic formaldehyde donors include:
The presence of formaldehyde and its donors are also known to cause skin reactions in sensitive individuals, can create and aggravate sensitivity, and can affect the lymph nodes. Source
Many times, companies jump on the "paraben-free" bandwagon, but substitute the parabens with formaldehyde donors. Always read the ingredients label.