I work at a place where we do exclusively pair programming (a software consultancy). A project always has at least one pair.

Each workstation has a computer, 2 monitors, 2 mice and keyboards. When someone can't be at the office then we sometimes use Tuple, and it's a great tool, unfortunately still only works on Macs.

Pairing works for us because it's more efficient than working alone, less bugs and better thought out design, faster spread of knowledge about our tools and the project in general. I joined a year ago and hadn't used Java or IDEA, pairing helped me learn all of it very fast, compared to if I had to work alone and struggle with learning all of the new things.