Looking at my Kindle Keyboard, I have one book (Moonwalking with Einstein) that is ragged-right and another (On Intelligence) that is full justified. Perhaps it's the formatting of the e-book and not the device?
I think it's an option that the publisher can control if they wish. In theory this is good, in reality it probably means it gets turned on or off randomly depending on which intern converted books today.
In the ebook's HTML, you can specify the text-align CSS attribute. If not specified, I believe the Kindle defaults to justify, and the Nook defaults to left-align. So books you read on the Kindle that are left-aligned (ragged right) probably have specified that in their CSS.
The second of those is interesting. Most of the lines are right-justified, and just a few aren't. It looks to me as if it's right-justified the lines except for when it can't do so without introducing an unbearable amount of whitespace, in which case it's fallen back to ragged-right.
(You can see it isn't just ragged-right where most of the lines happen to end in the same place; compare the spacing on, e.g., the first two lines.)
I don't think I've ever seen anything typeset that way before.
I think the reason you've not seen anything typeset that way before is because it's ridiculous to do it that way! You end up with an awful mix of fully justified and ragged-right... to my eye this makes me expect new paragraphs where there are none, for example.
It's such a shame that Amazon just doesn't seem to care about good typesetting practice. It's maybe just not something Amazon views as a "barrier to sale", but as Gruber says, the Kindle only has to do one thing well, so why shouldn't it do it fantastically well?
The justification in On Intelligence is what I'm talking about wrt words being "separated at most 1 em." Contrary to what Gruber says, there are no "unsightly gaps between words" because there is a maximum distance of 1 em between words, after which it favours ragged right.