But when both programs were minimized, something almost magic happened: IE7 released most of its memory back to the system; Firefox did not. In a minimized state, Firefox still consumed 57 MB of memory, while IE7 dropped to below 10 MB.
This actually has nothing to do with Internet Explorer, but more to do with Firefox. Windows naturally tries to free up memory of any windows minimized - it does this very aggressively. So much so that the Firefox developers thought they should overrule that. So by default, this feature of windows is not used. However, as any feature in Firefox - it is easily customizable. Just edit your about:config. And set config.trim_on_minimize as a boolean to true. This will 'magically' free up memory on minimize. Best part is that it doesn't go back up to the usage it was before even if you go through all your tabs.
At least for me this has no (noticeable) performance penalties, just free memory!
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