I have trouble believing this one because there are so many edge-cases that would cause it to behave poorly - universities and companies with a single shared IP address, VPN users etc.
I suppose the rule-of-thumb could be "if this IP address has only had <4 unique cookies associated with it, consider a match - if it has had >100 it's probably shared too broadly, ignore it"
I've noticed this myself a couple years ago. A new flatmate moved in and he was quickly suggested to me by LinkedIn, before we even exchanged any contact details such as phone number or e-mail.
> universities and companies with a single shared IP address
It's relatively easy to weed these out (simply ignore any matching results from IPs which see a lot of different people logging in), but actually I'm not sure that would even be a problem - universities and workplaces with a single IP would be exactly what LI wants, as the probability of you "knowing" someone from that same organization is high.