A shorty water heater is called that as a nickname because it is actually shorter than standard water heaters. However, these kinds of water heaters don't have less capacity than regular water heaters; they just fit in different spaces. This is because a shorty water heater has different dimensions than more traditional water heaters.
A shorty water heater can be installed where other water heaters won't fit. A taller water heater (which is about sixty inches in height) may not fit in spaces where it has to be elevated about 18 inches off of the garage or utility floor. This is in accordance with local ordinances which don't allow taller water heaters to sit on the floor of a garage space or utility room where flammable liquids could potentially be spilled. Generally, this is because a gas powered water heater has a pilot light that can ignite flammable materials.
A shorty water heater works well in San Francisco and Peninsula area because it can maintain the same amount of hot water that a normal water heater would and still fit in a smaller space. A shorty water heater can also be raised up to the required 18 inches off of the floor, which is a benefit to homeowners who may be doing renovations in place like condos and older homes.
The reason why that shorty waters heaters work in cramped spaces is that they are bigger around the middle. One misconception about shorty water heaters is that they are smaller and heat less hot water, but this isn't true. They hold the same amount of hot water as their taller counterparts; they just do it in a different way. So, shorty water heaters are a great option if you want to do a condo restoration, or if you need to comply with plumbing regulations that require your water heater to be installed higher because of local building ordinances.