Rated 5 out of 5 stars

This is still one of my favourite extensions, but it is starting to lose compatability. I have just submitted a fix to a bug that stops it creating temporary files for other software to use (on Windows), so I hope it will get an update. In the meantime, if you're determined to get it to work I recommend doing this:

Download launchy@gemal.dk.xpi from the 'Add to Firefox' link.
Rename it to launchy@gemal.dk.zip.
Extract the contents of launchy@gemal.dk.zip.
In the contents folder, extract the contents of launchy.jar (I used IZArc for this).
Go into the 'contents' folder and open main.js.

Change line 470 from:

persist.saveURI(URI, null, null, null, null, f);

to:

var privacy = PrivateBrowsingUtils.privacyContextFromWindow(window);
persist.saveURI(URI, null, null, null, null, f, privacy);

Recompress 'contents', 'locale' and 'skin' to a new launchy.jar (I used IZArc again) and delete these 3 folders.
Replace the original launchy.jar with the new one.
Recompress it all to launchy@gemal.dk.zip, being careful to keep the same folder structure.
To check the folder structure, open launchy@gemal.dk.zip and you should see the 'chrome' folder directly inside (and more). Directly inside 'chrome' should be launchy.jar and nothing else. Directly inside launchy.jar should be the 'contents', 'locale' and 'skin' folders.
Rename the new zip file to launchy@gemal.dk.xpi and drop it back into your extensions folder (or drag and drop it on an open Firefox window to install).
Give it 5 stars or donate something!

It still does not detect all compatible software on Windows x64, but you can use launchy.xml for this, see:
http://gemal.dk/mozilla/launchy.html#xmlfile