Typically what happens is the batteries will physically grow tenticles inside them, (dendrites) which tend to short things out, the individual packets / pouches, will be a short on the system and fail to take a charge anymore. Now one or two of these going bad may not be too big of a problem but it typically happens pretty fast, ie the progression of this is like falling off a cliff. Not to mention it IS a short circuit and while it may for lack of a better word 'burn the fault clear' pretty quick, it may also lead to overheating,excessive swelling, causing others to go bad.
The battery at this point becomes a brick. For the LiPo's, I honestly do not know why they are lying so fucking bad about recycling them. They ARE plenty recyclable!, there is a LOT of Copper, Cobalt, and YES Lithium in them too which they claim is the child labor, population killing metal, bla bla.
If the cells are, still usable, they will use them in lower demand applications, as stated, building storage, or offer them on a secondary market. For the Lith's pretty much nobody wants reconditioned cells, because of the dangers of dendrites, so they generally will end up garbage, but in the hands of someone with a bit of skill, have a ton of practical uses.
I have over 250 kw of power storage at my home from reconditioned batteries, I won't get into the details but a fire, they are compartmentalized, so go ahead, it'll pop a fusable link, isolating itself then it can burn itself out in the steel container that holds it.. Eventually i plan on just putting this all in a shed or a trailer once I find one that is pretty cheap.
sorry I got long winded, this subject is one that facinates me but. They ARE reusable, but most of the time just end in the garbage.
They CAN be recycled, but nobody wants to, I feel there are a LOT of politics in that. Freeze the fuckers, the chemistry stops, now chop them up, separate them, and then do what you have to do, how damned hard is that?
Aaron