Yes, that's what it does. With no profile folder, the app rebuilds your whole...
profile 
It's just like a preference file but of course holds a lot more things... your bookmarks, preferences, cache, plugins, etc.
So to remove the profile folder resets all those. If something in there was creating a problem, rebuilding the profile would certainly fix it.
Yeah, I thought of suggesting starting from scratch with a new profile, but I thought that was a little too drastic. =P
Though yes, that will usually always fix
any Firefox problem (unless the problem is with Firefox itself, i.e. the Firefox.app package).
But of course, you lose all your cookies (meaning your site logins), history, cache, etc.
though Bookmarks can be imported from the old profile to the new one.
I've only resorted to a new profile a couple of times when my profile really goes completely FUBAR. =P
Bizarrely that fixed it!! The folder was called Mozilla and not Firefox and it only had one file in the folder (pkcs11.shlb for reference) but it seems to fixed the problem!
But Liam removed a folder called "Mozilla". And to my knowledge, Firefox only works from the "Firefox" folder. That was my confusion of which I had no idea about.
Yes, actually, this is quite strange.
I assume by what you (Liam) said that this "Mozilla folder" was at
~/Library/Application Support/Mozilla/
I do not have a Mozilla folder there,
although if I remember correctly, older versions of Firefox did create such a folder.
Current versions only make this folder:
~/Library/Application Support/Firefox/
which contains the profile folder.
note:
the complete path of profile folder:
~/Library/Application Support/Firefox/Profiles/[random characters].default/
Although there is also a "Mozilla" folder at
~/Library/Mozilla/
but this is created only by the old Mozilla Suite or SeaMonkey.
But anyway, I suppose all this doesn't matter, as long as the problem's solved.