When we're talking about programming/system engineering etc, there's the part where you might spend 4 hours doing "measurable" work -- ie: producing artefacts. Be that designs, code, documentation -- and in your "free time" your brain is still working on the problems in the background. I think part of the idea is that (to paraphrase Greenspun[1]) there's no point in keeping people from having fun while they're thinking.

Like the new head of our CS department said: he doesn't really care if his professors spend most of their time in the office or at a cafe -- as long as they're comming up with new ideas and do research (the institute has a very high rate of publication for its size).

[1] http://www.paulgraham.com/opensource.html