Nope, that was just some wacky story about extending battery life which was totally false - Li-Ion cells don't suffer from memory or overcharging issues as they have their own internal microchip in the battery that cuts off charge when the cells are fully topped up. And Li-Ion cells work best and have longer service life when fully charged and topped up regularly. In fact, it's better to NEVER let a Li-Ion battery run all the way down as that is near the worst condition for these types of batteries.
The problem is it's a coding error where the charge circuit in the phone cuts off the charge supply early at a lower voltage than full charge (about 3.9v instead of 4.1v). Google hasn't deemed it a big enough error to worry about, although it's very annoying when the battery won't fully charge. I would prefer a fully charged battery that lasts another few hours on standby if needed. There simply is no reason not to fully charge a Li-Ion battery.
Actually, Li-Ion batteries maintain the best health when kept around a 50% charge. For obvious reasons, this isn't practical for smartphones, but laptops have recently started incorporating "battery health" and "battery life" charging profiles. The battery health profile is intended for people who typically leave their laptops plugged in and float the charge around 45-50%. The battery life profiles top it off at the expense of some overall lifetime use for users who spend most of their time away from the plug.
Li-Ion cells (the cells themselves, not the overall battery) do not like being overcharged, and overcharging is extremely detrimental to their health. Yes, the charging circuitry in the Li-Ion batteries can control the current going into the battery during charging, but only to an extent.
Li-Ion cells sit very happily at around 3.7 volts, as that's their natural output, but when they near full capacity, they output up to 4.2 volts. In order to charge them to that full capacity, you have to supply a 4.2 volt input current. The problem is that if the charging circuitry doesn't cut off quickly enough, or if there is an unexpected current surge, you could easily kill a cell during the process. Supplying a maximum input voltage of 3.9 volts is a safety measure to prevent overcharging. Yes, you could use 4.0 or 4.1 volts and get closer to the maximum charge, but as the battery ages, 4.1 volts, or even 4.0 volts, can eventually become enough to overcharge a cell and permanently kill it.
For those curious, I just unplugged my 4.0.3 Nexus S while "Charged" and the battery reads 96%, so the bug, for those who prefer to call it that, does persist with the new update.
