This is a possibility, using the standard hyphenation. For enabling hyphenation "everywhere", a new set of patterns should be prepared. See below for a different approach; in the next code, the \hyphenchar is set to an invisible one; the setting must be restored manually, because a setting of the \hyphenchar is inherently global.
\documentclass{article}
\usepackage[T1]{fontenc}
\usepackage[utf8]{inputenc}
\newenvironment{zerohyphen}
{\global\chardef\savedhyphenchar=\hyphenchar\font % save the current hyphenchar
\lefthyphenmin=1 \righthyphenmin=1 % no limits on hyphenation
\hyphenchar\font=23 }
{\par\hyphenchar\font=\savedhyphenchar}% eject the paragraph and restore
\begin{document}
\hyphenpenalty=-100 % just to make hyphenation more desirable
\begin{minipage}{3.5cm}
\begin{zerohyphen}
Lorem Ipsum is simply dummy text
of the printing and typesetting
industry. Lorem Ipsum has been
the industry’s standard dummy
text ever since the 1500s, when
an
\end{zerohyphen}
\end{minipage}
\end{document}

Here's a different approach (notice, however, that cooperation with UTF-8 would be complicated); the text is split at spaces and every word is printed letter by letter with a zero penalty between any two letters.
\documentclass{article}
\usepackage{xparse,environ}
\ExplSyntaxOn
\NewEnviron{zerohyphen}
{
\par
\franx_zerohyphen:V \BODY
\par
}
\seq_new:N \l_franx_body_seq
\cs_new_protected:Npn \franx_zerohyphen:n #1
{
\seq_set_split:Nnn \l_franx_body_seq { ~ } { #1 }
\seq_map_inline:Nn \l_franx_body_seq { \franx_printword:n { ##1 } }
}
\cs_generate_variant:Nn \franx_zerohyphen:n { V}
\cs_new_protected:Npn \franx_printword:n #1
{
\tl_map_inline:nn { #1 } { ##1 \penalty0 \scan_stop: }
\c_space_tl
}
\ExplSyntaxOff
\begin{document}
\begin{minipage}{3.5cm}
\begin{zerohyphen}
Lorem Ipsum is simply dummy text
of the printing and typesetting
industry. Lorem Ipsum has been
the industry's standard dummy
text ever since the 1500s, when
an
\end{zerohyphen}
\end{minipage}
\end{document}

\documentclass{...}and ending with\end{document}. – yo' Jan 12 '14 at 14:54