This is probably subjective as it is a dilemma between what is good for you and what is good for your customer, but I as a programmer, would really like to know what is the commonly accepted way of doing this. I will keep these answers to my question in mind for future projects.
I've personally never sold any of my work using a set rate per hour as I treat each project individually. However, if I do decide to set a price for every hour of work, would processing code (for example: compiling, downloading, uploading, auto-correcting/modifying) while walking with the dog or enjoying a cup of coffee count as "working"?
This example assumes that you can only continue working on the project when the processing has completed. Is it fair to keep the timer running during these hours of "work"? Absolutely not? Or is there a balance to be found somewhere?