Firefox is the best browser around right now, with a large open-source community to boot. Firefox maybe the best in terms of features and flexibility, but all this comes at a price. Firefox, as we all know, is a resource hog. It can take up 100+ MB of RAM when multiple tabs are open. Also, CPU usage shoots up. Occasionally, CPU usage hit 100% and the system hangs.
Memory hogging is caused by the caching of pages and images for faster browsing, as explained in this post by Mozillazine. Stupidly enough, Mozilla says that it is a feature, but I cannot see any reason why they would want to keep a ‘feature’ that even the most hardcore Firefox user hates. Now, Mozilla is working on fixing this memory hog especially since they are entering mobile browser market, and mobile phones’ RAM is limited. Hopefully, Firefox 4 would have better memory management 
There are many reasons for this hanging. Plugins and extensions, which are not part of the default Firefox install may cause this. Poorly optimized sites which load several images and ads may cause this. These are inevitable.
There are some things that we can do to reduce Firefox CPU usage, like:
- Disable the Java plugin, by going to Tools>Options>Content tab> uncheck Enable Java. Most sites do not use Java. So, you end up wasting CPU resources for a plugin(yes, it is sorta plugin) that you do not use.
- Disable Images by going to Tools>Options>Content tab> uncheck Load Images automatically. It may sound stupid, but many designers go overboard and add several image backgrounds, coupled with post images. Taking out those darn images out of the equation can work, especially on older PCs. Note that this is a last ditch effort, and you should try other methods mentioned here before trying this one.
- Open fewer tabs. By this, I mean that you should not open more than ~10 tabs. The more tabs you have, the more memory Firefox consumes. Experiment with the number and come up with an optimal number for your PC.
- Cut down on the number of extensions used. More specifically, try to remove those extensions which access internet to update information for each site(Alexa toolbar, PR tools, StumbleUpon toolbar etc.).
Granted, disabling images and opening fewer tabs may sound absurd, when seeing vivacious images and browsing several sites simultaneously are important to most. The fact is, these little things can be the difference between a crashing browser and a perfectly-working one. Also, in optimization, every bit counts.