Every employee and manager takes an occassional mental holiday while at work--it's simply human nature.  One of the most common means is by surfing the internet.  While some managers and organizations may make the initial move to completely ban internet surfing, doing so can be a major morale buster.

Most people are professional in their behavior, and they're going to use the internet just as professionally.  If employees take a little time to do holiday shopping or check their fantasy football standings, so be it.  instead of monitoring their internet time, monitor their productivity.  Monitor their progress towards measurable performance metrics and goals.

Obviously, organizations must make clear their policies concerning forbidden sites and activities that are illegal, but don;t forget to inform your emplpoyees why certain activities cannot be allowed because they simply put too much strain on your technological infrastructure--like downloading videos or music.

On the internet usage front, stay away from the dictator mode that helps create an oppressive work environment.  Be open and honest on expectations, monitor performance to those expectations, and let your professional employees manage their activities to top performance.