I've worked at a company that did 100% pairing as well, you'd be surprised at the productivity gains that you experience with it, depending on your work habits.

Not everyone can sit down for 8 hours a day and write code. Some number of people get distracted by Facebook, Hacker News, whatever it might be. Having a baby-sitter of sorts sitting next to you certainly keeps this kind of person on track - and I know, I'm one of them.

Of course this is not every engineer out there. Sure, some people are able to stay focused for 8 hours a day, but I'm certainly not one of them.