Basically, MozillaCorp doesn't like Debian shipping a modified Firefox, while Debian points out that they have to modify the browser to fix security problems. This claim has been made: "Also you have to take into account that firefox.org doesn't care about Linux. They produce "updates" that are first Windows precompiled binaries. Their Linux stuff is still in CVS, not even tarball released yet, so we have to try and take a CVS snapshot or troll through CVS logs to find the right patch."
Also consider that that Debian can't ship Firefox with its original logos because the logos have a non-free license, and then add to that that up until recently MozCo had been looking the other way but has started getting pushy, and you're left with the real possibility of a fork. (And MozCo has good reason to enforce their trademarks so I can't blame them, but instead recognize a fork as inevitable.)
I'm 100% in Debian's camp on this, but that almost doesn't need to be said 'cause I'm a Debian zealot. The whole point of having the DFSG (a social contract with a commitment to freedom) is to stick to it; Firefox may be an important piece of software but it's not important enough to lose sight of the goal.
On the other hand, I had thought "Firefox" was the silliest name imaginable, but I think "Iceweasel" has pushed it down to #2.