Almost all graduate programs have some form of a research proposal that students have to write towards the beginning of their degree. Sometimes it doesn't happen until they are well into their research (which seems a bit counter productive) and some institutions make students write their proposal as early as possible. Either way, it is a fairly common requirement.
I have heard a lot of debate about the usefulness of this exercise, and although most people see value in having the student think about the approach they plan to take, there tend to be two extremes of PI involvement in the actual writing of this document.
On one hand, there are those who offer the student little help outside of comments once the document is nearly complete. The upside of this approach is that it forces the student into the literature and encourages more independent though at the formative stages of the work. Students also get practice writing a (sort of) scientific document, which may help some more than others. The downside, however, is that students typically take an enormous amount of time to create the document this way and the proposal rarely reflects the finished project once serendipity and actual data come into play.
The other extreme is allowing a student to use a grant proposal or lab manuscript as a template for their proposal, with the understanding that liberal "borrowing" of text and/or figures is expected. This approach drastically cuts the time required to produce the document, but may lead to the student spending far less time thinking about the work they plan to undertake and following the "lab plan" more closely with less of their own stamp on the project.
If the student's comprehensive or (less likely) qualifying exams are tied to the proposal document in any way, it could be argued that the first approach better prepares the student, but I can think of cases where this would also not be true.
So, blogoshphere, I am curious how you approach the research proposal, as a PI or as a student. What has been most effective for you and why?