If your extension cord does in fact get warm, then you're either drawing too much current or the internal insulation has broken down due to age or misuse. This seems to be a debated topic online, with an interesting opinion given here >
http://wiki.answers.com/Q/Does_a_coiled_extension_cord_overheat I would say that theoretically an extension cord, in good condition, will get warmer under a high current draw when coiled than when not, due to it being unable to dissipate the heat as rapidly, as Coop says. In light of this, I hereby retract my semi-snarky reply about electrons turning corners.
