I was taught to not strike at full extension because of the risk of hyperextending the limbs due to a lack of resistance.
To avoid this sort of injury, never fully extend (or hyperextend) your elbow joints during shadow boxing (especially if you are punching hard and fast). Your jab gets its speed and power from the rotation of your shoulder joint, not from the (hyper)extension of your elbow — always remember that.
Shadowboxing and bag work essentially work two sides of the coin. Shadowboxing teaches you how to throw your strikes when you miss (no resistance, so you don't want to go full extension) and bag work teaches you how to throw your strikes when you hit (resistance, so you need to make sure your movement is lined up so that your joints, tendons, and muscles are not compromised on impact) with sparring being the acid test for being able to switch based on whether you are about to hit or not.
That said, you've modified your question to reference people doing much less extension, 25%-50%. Some would argue that's a mistake, but others claim that this is to improve flow.
Here you’re working on rhythm so it’s ok to minimize the movements to help you find a natural “fighting dance” rhythm in your body, rather then fully extending all your punches and putting 100% power on every movement.
As for why strikes are generally at full extension during karate kata, and many other Asian martial arts, it's a combination of that part of the purpose of kata is to demonstrate each individual technique and that those styles have a focus on "one strike takedowns" (regardless of one's beliefs in how feasible that is), so you're training to show full force, and often to pause after each technique to demonstrate it. Because of the regularity of the movements, there's more control available, and therefore less chance of hurting yourself.