Been through dozens of interviews in the last 5 years and never encountered this. I think this would work well because it draws out a conversation. An interview should be about discovering how a person solves problems, not about either the problem or the solution.

In fact, a long time ago an accountant used this very technique to decide that I was a smart software guy. He then hired me even though he knew nothing about computers and software.

If an engineer can contribute in a pair programming session then you know they have something to contribute in your development team later, even if you don't pair all the time.