"Web Extension API" is exactly the issue at stake here. Chrome develops a new API for extensions. Everyone jumps on it. Firefox abandons it's powerful (although insecure) extension API, and re-writes it to follow Chrome's. There's a lot of marketing-speak around the reasons FF did that, but it really boils down to: Chrome is winning in the extension ecosystem, let's make them all compatible with FF too. At the loss of the entire existing extension catalog.
Firefox's extension system was powerful but there was next to no chance that XUL based UI was ever going to be adopted in the other major browsers. I'm sure that tapping in to the Chrome extension ecosystem was a big factor in the decision but I would argue that the Chrome extension API was also a far better suited candidate for cross browser standardization.
Firefox's extension system was arguably too powerful. Back when I ran Firefox, I regularly ran into extensions that conflicted because they monkeypatched the same parts of the browser UI.
Firefox intends to keep many of the powerful feature in its version of the extension API. The previous API was powerful because it let addons reach in to the guts of Firefox's UI and tweak whatever they wanted. This meant that some parts of the browser were frozen from being changed, and extensions broke every release. There was no public-private distinction. It seems like the plan is to add most of the capabilities that were used by the old addons in the new API, so most of the useful Firefox-only addons should still work.
