I have had the same vacation policy since I started my group at ProdigalU. My students can take 3-4 weeks of vacation per year as they see fit, as long as they remain productive while they are supposed to be working. I do not formally track their vacation time, though I keep the emails with their requests so I have a record if needed. Since starting, I have never had to deny a vacation. When my students are not being as productive as they should, they know it, and don't ask me for much time off. I once had to tell a student that if they planned a long vacation for the holidays, they would need to start being more productive, but other than that, I have found that my students are quite responsible in taking care of it themselves. In fact, I have told my students that they should not work on manuscripts or literature searches while on vacation, since it is supposed to be vacation!
When I was a student, there was a group that was notorious for not being "allowed" to take vacation. The group policy was 2 weeks per year maximum, not during mid-summer or winter break, since grad students were supposed to be in the lab more when classes are not in session. This always struck me as ridiculously stingy and likely to lead to burnout and resentment.
One of my colleagues has a kind of unusual problem--one of his best students is traveling too much. Part of it is conference travel, which also takes time away from the lab. Part of it is the desire for vacations to visit family as well as vacations for time off (since not everyone finds family visits recharging). But it is an odd problem for an ambitious student to have, since slowing down on progress delays finishing the PhD, and ambitious students usually recognize this.