I've paid for features to be implemented and been paid to implement features. It's not common per se but it's not frowned upon in my experience. It's often a lot more efficient to pay someone else (or them you) with expertise and a commit bit to get something done; just don't expect money to allow you to go against the projects grain and tack on cumbersome or obscure functionality.
I had the exact same experience. I worked for an open source company that had bounties and I think it was one of the major factors that completely killed the open source community around it. A few years later a friend of mine mentioned she had contributed to the project, but stopped after she worked on something for 10 hours and realized that worked out to about $10/hour.
However, it seems like a good model if it gets up to market rates (if someone could do this in an hour or two) and especially if it's something developers wouldn't do on their own.
That might work for weekend hacking sessions. But for serious projects, most of the development process is financed by businesses. Take a peek at the Linux contributors: http://arstechnica.com/open-source/news/2010/12/linux-kernel...? but this isn't a sole case.
I'd love to do it myself, but I've tried a few times without much success. Hopefully, I will be able to learn from someone else should they choose to do this.
I thought open source was about "scratching your own itch", not "here's $20, scratch me"