Fearfulness towards strangers is not uncommon in dogs, but when it leads to aggressive behavior, it can become a serious problem. Typically, fear aggression is the result of improper socialization as a puppy or past mistreatment. Very often, it's a combination of these factors.
Unlike dominance-aggression, fear-aggression occurs when a dog believes he's in danger of being harmed. It's your dog's perception of the situation, not the actual intent, which determines his response. For example, if a dog was once abused by a small child, he may perceive all small children to be a threat and may lunge or bite to protect himself.
How to treat the problem
If your dog has aggressive tendencies, you know how stressful it can be. However, punishing your dog—physically or vocally—for aggression will only intensify the problem by adding more stress and anxiety to the situation. It will confirm his suspicions that strangers are indeed dangerous.
The best course of action is to seek guidance from an experienced dog behaviorist. These trained professionals generally use a desensitization method to treat fear-aggression. They'll start by breaking down the triggers for your dog's aggression into their most basic components, one small step at a time. They may start by pairing positive reinforcement (such as praise or treats) with the trigger stimulus, gradually establishing pleasant associations between the two. Successful desensitization takes time, patience, and know-how.
Your dog's limits
In the meantime, don't push him outside his comfort zone. If bearded men stress him out, don't try to take a picture of him on Santa's lap. If he's anxious around children, watch him carefully around kids—or avoid them altogether.
Above all, get help for your dog. Ignoring the problem can only lead to trouble. One snap or bite from your dog can lead to strained relationships, or worse, with friends, relatives, or strangers, none of whom know how lovable your dog can be when he's alone at home with you.