For Firefox 2 the main aim was for parity with HashColouredTabs - although, acting on comments in fora and blogs, it should now be compatible with most themes and extensions.
For Firefox 3:
• Show icon everywhere that the browser does - including History, Bookmarks and urlbar autocomplete results
• Allow configuration of icon colour (see previews) [Tab context menu]
i) Restricts the brightness of colours used
ii) Don't use website defined icons (Alters preferences browser.chrome.favicons and browser.chrome.site_icons)
• The option to only show icons after a certain number of tabs is open was removed in 0.4.19.
• In Private Browsing mode you cannot set new icon colours, only change or reset existing settings.