Today I went to turn on the 3-way CFL in my Living Room lamp and on the lowest setting it started to make a crackling/popping noise. I immediately removed it and replaced it with a regular 3-way bulb. What is happening? 

Good thing you did! What you described doesn't sound good at all! Better not use that lamp anymore. Dunno why it made those noise you mentioned.

It's junk and garbage, your ballast is going bad, use incandescents, not CFLs!

Now what you do is put it in a junker lamp, take it to the middle of the concrete driveway (away from anything that will burn) and turn it back on and see what happens 

I agree with the others the ballast in the lamp is probably going bad and might pop soon.

Good thing you were there to turn it off and take it out of service.

I think the lamp died and the ballast just follow. The root cause for short lamp life might be, then the ballast does not properly heat electrodes on dimmed setting (= design flaw of the ballast). In the fluorescent lamp the arc heat electrodes correctly only on full power, on dimmed setting electrodes need additional heating, otherwise the discharge goes to cold-cathode mode and sputter off the emissive material from the electrodes.

I have installed a CFL 3-way lamp in my living room 3-way lamp because the lamp is base-up. I replaced the lamp 5 times in 1 1/2 year before putting the CFL. It's a GE and works fine.