C:\Documents and Settings\[USER]\Application Data\Mozilla\Firefox\Profiles\bookmarkbackups
and they are formatted as JSON! Trouble is, the JSON text has no newlines or tabs or other spacing, so if you open the bookmarks file in Notepad, you'll see One Big Huge Line of unformatted text.
Unformatted JSON is ugly. But fortunately, there's an answer.
Over at http://archive.dojotoolkit.org/nightly/dojotoolkit/dojox/gfx/demos/beautify.html there's an online form that will beautify (pretty-print to your screen) any raw JSON that you paste into the form. It does an exceptionally nice job. Give it a try if you have a need to reformat JSON source.