In my experience it is not wide-spread, but you (or rather the OU) is not behind the times. Some forward looking software development companies do use it.
We've done some peer programming (two people, one keyboard) and it does offer advantages. We've found it can be good for solving particularly thorny problems, like implementing complex subsystems or fixing obscure time/thread related bugs. But for routine stuff it can definitely be overkill. A great programmer is much more productive than an average one and if you put two great programmers on your average task you'll have at least one really bored programmer on your hands.