Dealing with “java.lang.OutOfMemoryError: PermGen space” error

Recently I ran into this error in my web application:

java.lang.OutOfMemoryError: PermGen space

It’s a typical Hibernate/JPA + IceFaces/JSF application running on Tomcat 6 and JDK 1.6.
Apparently this can occur after redeploying an application a few times.

What causes it and what can be done to avoid it?
How do I fix the problem?

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