Do managers monitor LinkedIn accounts? Absolutely.
I worked at a company for several years and only spoke with the HR person 2, maybe 3 times over a 3 year period. Then, when I marked my LinkedIn account as 'Open to Opportunities', I got a LinkedIn connect request from our HR manager the next day. Creepy.
I make it a point NOT to connect with my current boss/co-workers on LinkedIn. I also disable the auto update feed that sends out messages when I am active on LinkedIn. Unfortunately, this nullifies some of the networking features of LinkedIn, but it also helps protect my current job if I decide to start looking.
Also, I don't connect to many recruiters and I clean up my connections when my feed gets too 'spammy'. Be careful who you talk to in the recruiting world and make sure they know you DO NOT give them permission to talk to your current employer. I've had recruiters verify employment on me before even offering me a job. At a small company this news travels FAST.
Recently, a recruiter did that to a co-worker. Unfortunately, a sales person picked up the phone on that call and announced to the entire company (10 people in a small cube farm), "Well, I guess Jenny is looking for a job, because I just got a call from so-and-so asking about her employment."