Just read the policy of the add-on or any application and what you clicked through when you setup the phone you're using. Here is an example. see screenshot

https://www.digitaljournal.com/business/report-finds-only-1-percent-reads-terms-conditions/article/566127

https://www.google.com/search?client=firefox-b-1-d&q=users+don%27t+read+user+agreements

The question is about the desktop edition Windows 7. There isn't any policy to read, or at least i couldn't find any. The Warning is a generic one and the explanations described in this mozilla support: https://support.mozilla.org/en-US/kb/permission-request-messages-firefox-extensions don't say anything about where those data are collected (locally or remotely) and where the process of that data is taking place,

This permission gives an extension the ability to execute scripts in any tab, any time it likes. So hypothetically it could transmit SOME data, but it's not enough to access YOUR data like bookmarks or history.

Of course our policy doesn't allow spying on users, so all the add-ons from AMO should be safe.

So unless an addon is a password vault / storage utility or password generator if an addon collects such data i assume this should fall under "spying" on users. And should mean that credentials, Credit Card Nos and Bank Acc info can't be transmitted over the internet? If yes, Is Mozilla actively monitoring this behavior for all Addons that shouldn't require such a thing in order for them to work in the AMO? Or it is left to developers to comply with TC?

For example an addon that enables right click on a page or an addon that can copy multiple selected images links. aren't required to transmit that data in order to work. I assume they can process them locally.

On an another example, an addon that translates text to other languages and therefore is required to transmit the text over the internet in order to get it translated and then receive the translated result, is it restricted to transmit just the text selected by the user and not other parts of the page ?

Some known tricks are monitored. Of course not every add-on is being read by a human, so something always could slip through.

For example an addon that enables right click on a page or an addon that can copy multiple selected images links. aren't required to transmit that data in order to work. I assume they can process them locally.

Yes.

On an another example, an addon that translates text to other languages and therefore is required to transmit the text over the internet in order to get it translated and then receive the translated result, is it restricted to transmit just the text selected by the user and not other parts of the page ?

Add-on of this kind doesn't really need to "Access your data for all websites".

On an another example, an addon that translates text to other languages and therefore is required to transmit the text over the internet in order to get it translated and then receive the translated result, is it restricted to transmit just the text selected by the user and not other parts of the page ?

Add-on of this kind doesn't really need to "Access your data for all websites". </blockquote>

Can you please explain why they don't need "Access your data for all websites" ? Is there a more specific option for addons to access only some of the data? And if there is, what are the categories of those data? In all those years i use FF i never saw an addon to ask permission for some specific data. They ask for all data. Which should make sense because if i need to translate text, how should someone pinpoint in settings which text in which area ?

Access data in active tab is a different permission, that should be chosen here. Please read the documentation on MDN if you need to know more.