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?

#jpa