That's the approach I've taken and it has worked out really well. As long as they're getting their work done, I'm not concerned with how much time they're taking off.
I think your implication that there is some unspoken upper limit is valid, but as long as said upper limit is more than what you would have gotten for vacation days (8 weeks, or 40 days, seems way beyond the normal amount. Microsoft started at 15 days.), there seems little reason to complain. I don’t think you would find anyone willing to allow 364 (modulo weekends) days off each year even for the best employee, so of course it’s not truly unlimited.
Absolutely, and as a result the manager gets glowing reviews and can also justify an increase in headcount which will improve their status in the organization.