Actually, it has to do with the oxide layer in the Lithium battery. Good temperatures make it degrade slower, but it still degrades. LiFePO4 degrades slower than LiPo by a factor of 5 or better, but has lower power density (3.2V instead of 3.7V.)

Yes, LiPos degrade with use. My five year old car has 80% capacity. My One Plus from beta has about 85% capacity.