I actually used them as a hosting provider for a while, and followed the support forums. Supporting the Lifetime offering was a challenge pretty much from the getgo, because some folks were less than neighborly with their usage of system resources, partially out of ignorance, partially out of Rails playing very poorly with shared systems, and partially because you attract an interesting type of customer with this offering. The physical hardware had some faults and probably has not improved much over time.
Meanwhile, shared hosting for Rails is, well, not a very attractive option over the last couple of years, thanks to VPSes, Heroku, Amazon, etc etc. Joyent apparently wants to exit the business.
Of note: I remember somebody asking Slicehost to match the business model and Matt shot them down saying that it was too gimmicky for his taste and wouldn't be mutually beneficial. Slicehost eventually came up with a neat solution towards the same end: they were oversubscribed, so they sorted their waiting list by the amount of non-refundable deposit you were willing to make, giving them much-needed cash flow without committing them to service for forever.