[mod50ack]

That's not true anymore. You have to press the Firefox logo on the about screen a few times, which will make the menu option appear in settings to install an extension from the local filesystem

[spartanatreyu]

Fixing this explanation:

You need to go Settings -> About Firefox -> Click the logo a bunch of times on this page specifically -> Press the back button

You will now see the Install extension from file option.

[mmwelt]

Wow, that's good to know, thanks!