A: 

Firefox only allows one instance of each profile. If you did not conigure anything for it and your firefox browser is open when starting the test. Firefox blocks selenium from using it.

Configure a profile in Firefox and you can configure selenium to use a ff profile

when you run Selenium Server, run with the server with command-line option -firefoxProfileTemplate "path to the profile"

(in case you didn't configured that)

Configuring profiles in FF

Redlab
I'm running tests on Ubuntu and I really do not know what is the Firefox profile and what is the path to that. I tried "java -jar selenium-server.jar -firefoxProfileTemplate /etc/firefox-3.0" in terminal when I starting the Selenium server, and I close firefox before starting test but It still gives the same error.
noktasizvirgul
if you start firefox with "-p" option you can access the profilemanager, "-p nameofprofile" option starts FF with the profile named as nameofprofile.
Redlab
@Redlab - This shouldn't be the case as Selenium makes a copy of the FF profile and runs with that. You might encounter locking issues during the copy though.
dhackner