Hello Phlowcus,
When a Li-Ion cell sits in a over discharged state, the electrolyte and electrodes oxidize. A key factor is the amount of time spent at the low voltage.
This oxidation damages the cell. This damage shows up as a loss of capacity, and higher internal resistance. Higher internal resistance leads to increased cell heat during charging and use. Increased heat does its own damage and the result is lower capacity and higher internal resistance and the downward cycle continues.
When the damage proceeds at a uniform rate and with a uniform distribution, the cell simply wears out. The problem occurs when there is a localized "hot" spot. This can occur during charging or discharging, but seems to show up more often during charging. It may be better to say that it is observed more during charging, but keep in mind that most of the time it is difficult to monitor cells during use.
If the cell still has good capacity, holds voltage under load, and doesn't show an accelerated self discharge rate, it should be good to use.
There are variables in cells that make it difficult to determine how much damage they can take before they become distressed. We make general statements because all cells should perform well if their voltage is kept between 3.5 and 4.1 volts. It should be no surprise that there are exceptions to the general rules. It should also be no surprise that if you live in the area of exceptions, sometimes things will go wrong.
Another consideration is cost. If replacing the cell is beyond a persons means, they tend to accept higher risk and will use increased vigilance to offset the risk. On the other hand, others value peace of mind above the replacement cost of the cell. Still others will approach this as a "science experiment" and will endeavor to define the various shades of gray.
Tom