I have a question for those who uses a lot of random encounters. Do you give XP and loot for the encounter?
Imxp, it depends. I use so many fairly trivial and non-combat encounters, that neith xp nor loot is really merited. OTOH, if the encounter is level-appropriate or even difficult, the party ought to get something for beating it-- though I tend to keep loot on the low end, since I generally assume, frex, that a wandering band of orcs on patrol isn't carrying all their stuff all the time.
I keep worrying that my PCs would just wander around and keep level grinding or something. Yes, yes, time sensitive missions can negate this but I can't put my PCs on such adventures all the time without it being obvious.
Imxp, this isn't really a problem. Underground, it's easy enough to just "run out" of random encounters. Basically, I cross it off the list, and it's done. Thus, even if a party does attempt to merely level grind, nothing is "respawning" so there's nothing left to fight after a while.
Above ground, it's basically the same: I don't allow more significant random encounters to repeat in some geographical area. Thus, a party might encounter only one random wyvern, but potentially an infinity of angry hedgehogs (not all at once, of course). So let the party grind away: they'll get xp for the wyvern, but none for the hedgehogs (except, of course, the Ur-Hedgehog of Underdark, who leads the aforementioned infinity of hedgehogs).
Honestly, for me random encounters are more for flavor than anything else, often little more than a way to avoid saying "well, yet another day passes on the road." Not everyday has to be dangerous, or memorable, or even particularly interesting. But everyday should be something more than just another day.