The first time I’ve come across a 2.5 gal electric water heater installed under a kitchen sink. At first, my client thought it was some type of disposal. At first glance I thought it was a water purifier, until I looked closer and went Hmmmm.
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was there another water heater in the home?
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We remodeled our kitchen a couple years ago and that was on my “wish list”. The water heater was at the opposite end of the house and the wait for hot water was just crazy long. Drove me nuts when cooking and wanting to wash my hands. Getting the electrical there was just too much of a PITA so it didn’t happen but I can understand why someone would want it.
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There was 40 gal in the basement original to the home (1984). It was still in working order, but will need to be replaced soon. I’m thinking on the same lines as @mfellman in that the owners wanted hot water sooner than later. I have just never seen one.
man and i thought I was impatient… 
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Like trying to exit a MG when the “green apple two step” calls for the need for speed to the toilet. There is NO patience…
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Saves water, but not electricity…you pick 
I used to install them as point of use in commercial bathrooms and occasionally see them in homes but they are always from the 90s. Never new
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See those all the time. As electric tank heaters they seem to last decades… most of them are old in my area. The more modern version is an electric tankless booster under the sink. It requires bigger electrical, but works fine for the low volume of handwashing.
I’ve seen them in pool cabana bathrooms.
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There goes the theory about changing out anode rods every six years 
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Seems to me a circulating pump and a return is a whole lot easier to put Hot Water at the faucet when you want it. Don’t some systems use the cold water line for the return?
I see these all the time in portable mobile units (564 on average sq ft) as well as atop bathrooms in commercial. This one looks very old
1994 and stated in the report.
Yup, see them all the time for commercial applications such as in office condos or small retails stores where there is just one employee bathroom.
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Yup, Yup.
Basically only needed to wash hands. No showers, no laundry, no dishwashing beyond coffee cups.
Electric tanks seem to last far longer than gas ones, of equivalent size and quality. I’ll keep recommending anode rod changes, and powered titanium rods, until evidence to the contrary comes to light.