Mustafar is home to the native Mustafarians, who are one of the few species known to evolve on a planet with such harsh conditions. The reason Mustafar is so volcanic is because of the planets Jestefad and Lefrani: two gas giants whose gravities hold Mustafar in the center and cause the planet to erupte.
During the Clone Wars, Mustafar became a Separatist-occupied world. It was here that the Separatist leaders retreated so that they could hide from the Galactic Republic. It was also here that all the leaders were killed by Darth Vader, ending the War.