You can also go to
View-->Toolbars-->Customize and then find the icon for Smiley 3 and drag it onto a toolbar. Then click done and when you want to access the smilies, you click the icon
Ok. If you downloaded it to your hard drive, here is what you do:
1. Open the folder on your HD where the xpi file is
2. Open Firefox
3. Go to Tools-->Extensions
4. A window pops up that is "Extensions"
5. Then go back to the folder with the xpi file, and click, hold and drag it ONTO the Extensions window
6. Let go of the file ONTOP OF the Extensions window.
7. A install screen will come up and after 2 seconds you can click OK
8. Then after it is finished (like 5 seconds) close Firefox and the Extensions window
9. Reopen Firefox
That is how you install a downloaded file.
It is easier to install it directly from the website, but the above works fine