This is exploitative if you think that a) open source products are not helped by having a company to do their marketing for them and b) there is something vaguely dirty about making money within a 47 mile radius of one. Marketing is a core competency that most OSS products which lack corporate backing fail at, in spades. Whatever your criteria for success for git are (number of developers, number of users, increasing technological awesomeness), they're better off with a bigger community and they'll get a bigger community thanks to github.

Look at how much, e.g., Rails the OSS project gains from being promoted by people who know what they're doing (who subsidize their involvement with Rails by using it to power a fleet of closed-source apps). I think Rails might well be the first OSS programming framework where people actually sat down and discussed really elementary things like a) a marketing plan and b) a visual identity and c) a site that was designed to sell the product, hard, rather than just containing a download and a few desultory links to documentation.

Secondly, the whole point of distributed version control is that it is distributed

This is one of those funny engineer tunnel-vision moments. The whole point of git is that it is theoretically better than the alternatives, not that it upholds one holy grail on a bullet point list above all others. Persistence on a central server, management, backups, all that fun stuff is a great boon to folks who are too small scale to get the baked-in distribution backup effect (which would be about 90% of projects, at a bare minimum) and the collaboration ability doesn't hurt either. (If someone is working on a fork of your project halfway around the world and you are mutually ignorant of each other... sucks to be you, right?)

Many people, including myself, would never host the fruit of their labours on some free "social" site.

Yeah, and you're never going to buy a Hello Kitty backpack, either. That does not mean there is no market for Hello Kitty backpacks. (I apologize in advance if you are, in fact, a purchaser of Hello Kitty backpacks.) "I see no use for this, ergo it can't possibly be viable" is one of the categorical developer errors about business.

1,500 paying customers later I still get emails from developers saying "I saw your site, looks like it took a lot of work, but come on, nobody will ever buy it." This was once common enough that I wrote a form letter for it.