Can you give us some examples of what you are referring to? I ask because on Android an app scales according to the size of the device, so an app developed for a phone won't look like a pixelated crap-sandwich on a 10 inch tablet.
With iOS though, the opposite. Take Nike+ or the Nike Fuelband app as an example. Looks like absolute garbage on the iPad, because apps designed for iPhone don't scale properly.
I also ask because I have no idea what apps 'squish' on my Nexus 7???
Note that in reference to tablet optimized apps on Android, my post had 2 parts: they either don't exist or they suck (paraphrased).
I will list app examples, but I do not use my Nexus 7 much anymore for various reasons. So app example lists will be limited to the few apps I still have installed and the ones I use on all my devies.
In the case of them not existing, it is because apps just weren't optimized for the screen size. Which makes sense, with so many different screen sizes for Android, you can't optimize for them all. The developer makes it work ideally for whatever size(s) they want, and then rely on the SDK to make the app scale for other sizes. A distinction you need to understand is that an SDK scaling apps based on screen size does not equal the app being optimized for that screen size. That is something you conveniently left out in your mention of app scaling. This makes smaller tablets feel like oversized phones. When you have an app that was developed for ~5" screens be scaled out to 7-8", you have a bunch of empty space because the developer didn't optimize for that specific screen size. If they did optimize for the screen size, then the entire screen would be used efficiently. But that is of course not the case in most apps.
App examples of this: 1Password, Amazon, Calculator, Clock, Crashplan, ES file explorer, K9, and many more. I got tired going through my apps.
In all the examples above, none of those have different layouts for my Nexus 7 compared to my Nexus 4/5 despite one being a tablet and the other two being phones will smaller screens. In the cases of apps that do have different layouts for tablets, app elements get too close together, overlap, and require more scrolling (specifically side scrolling) because it can't fit menu titles due to poor optimization of a 7" screen. I find this most common with email apps, but it also occurs with shopping, news readers, etc.
I would also like to point out the problem with the only example you were able to bring up. You say the Nike+ app is pixelated on an iPad because it is not designed for an iPad. My fiance has shoes with the Nike+ sensor and she has the Nike+ app for her iPhone 5. It is my understanding that the sensor communicates with the iOS device during running outside, on a treadmill, or during any sort of workout. This often happens while the phone is in a pocket or in an armband during said run/workout. Tell me, how many people do you see running around the street with a 10" iPad strapped to their arm? Probably next to none. The reason the Nike+ app isn't optimized for a 10" screen is because the app itself isn't meant to be used that way. So you can use that as an argument, but the fact that this is your best argument is pretty sad in my opinion.