How much customization of letters of recommendation is necessary?
I have two levels of customization. Firstly, if the letter is for an internship at a lab, or an application to grad school or a job, I tailor the qualities that I emphasize and link those qualities to the specific job.

A second level of customization is if I have any connection to the institution (for example, when writing letters of recommendation for AT&amp;T Labs - where I used to work - I might mention this explicitly in order to convey that I understand the local culture)

This is above and beyond the usual pro-forma customizations for the addressee etc.