Is this possible? Chrome Dev Tools and Firebug both have this feature. Firefox Dev Tools only shows elements ON CLICK, but not on hover.
I don't think currently there is any option for that. But from Firefox 29 onwards this is possible.
From the docs:
From Firefox 29, the Inspector is no longer locked on the selected element: as you move the mouse around the markup in the HTML pane, the dotted border is shown around the corresponding element.
https://developer.mozilla.org/en-US/docs/Tools/Page_Inspector#Selecting-Elements
Demo: (Firefox Nightly)