Whether it makes sense or not depends on the camera used and the application.

As noted by Jeffrey, it is for "full frame" sensors. For cameras with a smaller sensor it does not make sense.

It makes sense if a larger field of view / smaller number of shots is a significant benefit for the application at hand, e.g. action panoramas (more overlap = more flexibility) or low-cost real estate panoramas (less shots = faster processing).

There are likely quality trade-off because fisheye lenses tend to be softer on the edges, and have been engineered by the manufacturers specifically for operation with the hood in place. Removing it may introduce flare and other unwanted optical distortions, and AFAIK once shaved there is no way back.

There is also the fact that if you shave a lens the manufacturer will be able to claim that all warranties are voided. The man I talked to at Nikon's Tokyo service center blanched when I told him how many panorama photographers with full-frame DSLRs were shaving the lens hood of their 10.5mm fisheye, and quickly pointed out that they would disown the warranty on such a camera.

I noted Yuv and Jeffrey's answers regarding shaving a Nikkor 10.5 on a DX nikon (crop sensor). I have a D90 and a Nikkor. Could you elaborate? I am a bit hesitant about shaving a nice lens, warrant the guarentee and end up with, well: nothing.

-Nikkor 10.5 -Tokina 10-17 -Samyang 8mm (aka vivitar 7mm, etc. etc.)

these are all "full frame" fisheyes when used on crop sensors. if you put them on a canon 5d or other camera with a "full frame" i.e. 24x36mm sensor, you will benefit by cutting off the lens hood, because the lenses can then be used as circular fisheyes - you will be able to make a panorama in 3 shots. The nikkor 10.5 with the lens hood cut off can see around 200 degrees (194 usable) - that means, it can see behind itself!

note - this message is marked as a "wiki" - whoever wants to edit, feel free :)