Has anyone ever been asked to show their Int'l Driving Permit while renting a car in Italy? (Venice in particular)
Nope. But you'd better have one if you want to drive, because if you get pulled over by the Carabinieri or the PolStrada and you don't have one, they'll take you to the same hotel where Amanda Knox was staying.
In general, throughout the EU, but especially in countries that have a "reputation" for driving issues (we are looking at you Italy and Greece!) enforcement of an IDP has really been stepped up. Certainly the Police are asking more, in Greece, many have reported rental agents demanding an IDP. Responses from Italy have been mixed, but for $15 and a picture, why risk a big vacation?
It has nothing to do with the rental agency. It is a legal requirement - a police and accident issue. Just because the operative behind the counter wanting you to drive off with their car for money doesn't ask you for it doesn't mean you don't need it. Other than getting carted off to the hoosegow, you will find that your insurance is invalid too. Could be a pretty expensive $15 mistake.