Steve Gibson suggests using WPA/WPA2 Personal encryption on hotspots to prevent Firesheep from working among users on the same network: That's an interesting idea, but only for the moment. Gibson explains the weakness to his solution in a comment below the post. I recommend at the bottom a solution involving WPA/WPA2 Enterprise that builds on Gibson's recommendation.
The shared passphrase version of WPA lets an access point and Wi-Fi adapter (the "station") negotiate what's sometimes called a session key (the pairwise transient key). You can't extract or crack that session key without watching the initial association during which secrets are sent, but which a party with the passphrase could monitor. But not so fast. You just need to force a deauthentication—currently not guarded against in 802.11 or Wi-Fi, but which will be one day—and all the stations will run through their four-way handshake again.
Someone who might run Firesheep, a point-and-click credential theft Firefox plug-in and proof of concept, is likely to not download and install Wi-Fi cracking software that would aid in this. Aircrack-ng, the gold standard, requires some technical know-how to use.
But the code is freely available and licensed under the GPL. Firesheep is also free, open-source, and available. All it would take is an interested party to combine the two into an active attack agent—perhaps called Firecracker. This would move use of the extension from potentially illegal in some jurisdictions (passive scanning may be legal, but sidejacking is probably a crime in most states and many countries), to definitely illegal in most areas (forcing deauthentication in order to obtain credentials). But it could still be a point and click operation.
Thus, a WPA/WPA2 Personal protected network would briefly afford some protection against Firesheep, it wouldn't be long lived.
The more sensible action is one I first heard discussed years ago. Enable WPA/WPA2 Enterprise (802.1X) on a network and give out the same user name and password to every user. This reduces the administrative burden of password management to zero, and allows any savvy visitor to get a higher level of protection. WPA/WPA2 Enterprise in the form of the most common method, PEAP, uses SSL/TLS to protect the handshake between station and access point, protecting the unique key assigned from even those with the same 802.1X login information.
Windows and Mac OS X have offered PEAP clients for years. Free clients for versions of Windows without it can be obtained. Linux has clients as well. There's no technical bar to set this up, just one of education. If you can't get users to employ VPNs, or they don't have access to them, 802.1X is a much simpler way to go.