I think Patrick McKenzie recommends contractors bill by the day instead of the hour, partly to get them to consider necessary break time as billable. Of course, if you get to the end of a day and realize you really have been very distracted all day, you don't have to bill it as a full day.
Family distractions can be a big problem, though. You have to have blocks of several hours — I think the ideal might be two 3-hour blocks in a day — where you know you're not going to be interrupted, short of a true screaming emergency. Getting this across even to one's spouse, never mind a young child, can be very difficult. Getting out of the house might be the only way. As Paul Graham once observed [0], even the prospect of an interruption can be enough to keep one from getting into a flow state.
