I think this is a smart move. These are both getting to be decent sized businesses (LinkedIn will apparently turnover $100m this year and Facebook is lookign at $300m) and giving employees the chance to cash out part of their options will give them more freedom to determine their own future by reducing the pressure to sell.
Given the paltry state of the public markets and the attractions of remaining as standalone businesses rather than part of say Yahoo!, Google or Microsoft creating an internal market for shares could in theory enable LinkedIn and Facebook to remain privately owned for a long time to come.
We had a similar scheme when I was at Cazenove that worked well – a company which resisted the pressure to sell or go public for 200 years (although admittedly it was set up as a partnership for the vast majority of that period). Operating an internal market for shares also has the additional benefit of keeping people focused on improving the value of the company – although it does raise the difficult question of how the valuation is set.
There is more detail on how the numbers work on Silicon Alley Insider.