Are you in private browsing mode? In that mode history is not stored, for details on getting out of that mode see the private browsing article.

I've never turned on private mode.

• You are in Private Browsing - Use Firefox without saving history mode if you see "Tools > Stop Private Browsing", possibly grayed
• You enter Private Browsing mode if you select: Tools > Options > Privacy > History: Firefox will: "Never Remember History"
• To see all History settings, choose: Tools > Options > Privacy, choose the setting Firefox will: Use custom settings for history
• Uncheck: [ ] "Automatically start Firefox in a private browsing session"

You can check the setting of the pref browser.sessionstore.max_tabs_undo on the about:config page.
See http://kb.mozillazine.org/about%3Aconfig

Start Firefox in Use Troubleshoot Mode in Firefox to check if one of the add-ons is causing the problem (switch to the DEFAULT theme: Tools > Add-ons > Themes).

• Don't make any changes on the Safe mode start window.

See:

• Troubleshoot extensions, themes and hardware acceleration issues to solve common Firefox problems
• Troubleshoot issues with plugins like Flash or Java to fix common Firefox problems

I have a 'zero' on the 'about:config'. I started on 'safe' and the 'recently closed tabs' was still grayed out.

had no add-ons turned on.

what now? Thanks

If the pref browser.sessionstore.max_tabs_undo is 0 (zero) then you need to reset the pref to the default value (10) via the right-click context menu (Reset).

See also http://kb.mozillazine.org/browser.sessionstore.max_tabs_undo