I wonder why would people hurt their eyes like that, squinting at a tiny little screen for minutes/hours... For god's sake it's only a 1.5-inch screen... My thumb is bigger than that.

No, they are usually products that have been returned to Apple because of defective parts or simply wanted a refund. Apple then repairs and reconfigures them and sells 'em at a discount. They're mostly as good as new, but some of them might have some minor scratches/marks.