The Firefox status bar has always been the location for add-on icons, even after Mozilla replaced the original bar and hid the new one by default. Add-ons like NoScript, Download Helper or Greasemonkey display icons there that allow you to use functionality they provide. Some let you move the icons to another location in the browser, like the navigational toolbar for instance.
Addons in Urlbar is an extension for Firefox that moves all icons from the status bar into the browser's address bar. This is different from manually placing the icons in the navigational toolbar, as you can't drag and drop the icons into the address field, only on the toolbar next to it.
Unlike url-addon-bar, which also moves the icons from the status bar to the address bar, it automatically hides the icons until you hover with your mouse over the address bar (and not necessarily on the region of it where the icons are located).
The advantage here is that there is more space for the address in the field, the disadvantage that you do not see notifications if they are displayed as icons. A basic example is the Download Helper extension that indicates if media is found on a web page. Since you can't see that it is anymore, you need to hover over the address bar to check up on that. It is similar with other extensions such as NoScript.
The core reason for moving the icons from the status bar into the address bar is space. Since the Firefox status bar is not really used for anything besides displaying those icons - url hover information for instance is displayed in the browser and not in the status bar anymore - there is not really a need to keep it displayed if the add-on icons are removed from it.
While that may not be such a big issue on large monitors, netbook users or users who work with small resolutions may like the fact that they get another 20 or so pixel for the actual website that they are viewing. In the end, it all comes down to personal preference.
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