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It is all paid time off. A lot of tech companies in the US have this policy. I know software developers that have taken two months off (paid) after a big product launch. It is part of the compensation and perks.

Ironically, this policy is illegal in most European countries.

These are actually a benefit the the employer. Issuing official paid time off amounts to additional compensation to the employee. If you have 3 weeks of paid vacation available, that shows up on the company's books as a liability that has to be accounted for on their balance sheet. So, you are in effect being paid your salary + however many days off you get. I'm not sure how it works with an open door policy, but I suspect they'd be able to assume a smaller liability based on the actual number of days people take off rather than some amount that they're owed.

I'm positive it's paid time off. Heroku and GitHub have identical policies.

It is entirely paid time off.