Unicode in two parts of a URL is usually encoded, the domain itself and the path. Those should be rendered in actual unicode to make them more user-friendly.
The URL in the urlbar should appear decoded
Punycode remains visible in the security popover(!)
While hovering the statusbar, domain and path should be in unicode
Error pages should use the unicode hostname
Dialogs for permissions and scripts should use the unicode hostname
Unicode in two parts of a URL is usually encoded, the domain itself and the path. Those should be rendered in actual unicode to make them more user-friendly.
Examples: