How do I properly exit a C# application?

From MSDN:

Application.Exit

Informs all message pumps that they must terminate, and then closes all application windows after the messages have been processed. This is the code to use if you are have called Application.Run (WinForms applications), this method stops all running message loops on all threads and closes all windows of the application.

Environment.Exit

Terminates this process and gives the underlying operating system the specified exit code. This is the code to call when you are using console application.

This article, Application.Exit vs. Environment.Exit, points towards a good tip:

You can determine if System.Windows.Forms.Application.Run has been called by checking the System.Windows.Forms.Application.MessageLoop property. If true, then Run has been called and you can assume that a WinForms application is executing as follows.

if (System.Windows.Forms.Application.MessageLoop) 
{
    // WinForms app
    System.Windows.Forms.Application.Exit();
}
else
{
    // Console app
    System.Environment.Exit(1);
}

Reference: Why would Application.Exit fail to work?

I know this is not the problem you had, however another reason this could happen is you have a non background thread open in your application.

using System;
using System.Threading;
using System.Windows.Forms;

namespace Sandbox_Form
{
    static class Program
    {
        private static Thread thread;

        [STAThread]
        static void Main()
        {
            Application.EnableVisualStyles();
            Application.SetCompatibleTextRenderingDefault(false);

            thread = new Thread(BusyWorkThread);
            thread.IsBackground = false;
            thread.Start();

            Application.Run(new Form());

        }

        public static void BusyWorkThread()
        {
            while (true)
            {
                Thread.Sleep(1000);
            }
        }
    }
}

When IsBackground is false it will keep your program open till the thread completes, if you set IsBackground to true the thread will not keep the program open. Things like BackgroundWoker, ThreadPool, and Task all internally use a thread with IsBackground set to true.

By the way. whenever my forms call the formclosed or form closing event I close the applciation with a this.Hide() function. Does that affect how my application is behaving now?

In short, yes. The entire application will end when the main form (the form started via Application.Run in the Main method) is closed (not hidden).

If your entire application should always fully terminate whenever your main form is closed then you should just remove that form closed handler. By not canceling that event and just letting them form close when the user closes it you will get your desired behavior. As for all of the other forms, if you don't intend to show that same instance of the form again you just just let them close, rather than preventing closure and hiding them. If you are showing them again, then hiding them may be fine.

If you want to be able to have the user click the "x" for your main form, but have another form stay open and, in effect, become the "new" main form, then it's a bit more complicated. In such a case you will need to just hide your main form rather than closing it, but you'll need to add in some sort of mechanism that will actually close the main form when you really do want your app to end. If this is the situation that you're in then you'll need to add more details to your question describing what types of applications should and should not actually end the program.

In this case, the most proper way to exit the application in to override onExit() method in App.xaml.cs:

protected override void OnExit(ExitEventArgs e) {
    base.OnExit(e); 
}