Around my way, heres how it usually works.
Normally, we depart our base VFR and contact approach control to request practice approaches. We'll tell them which ones we want and how many, and how the last one will terminate. From here, we are given a squawk code for separation and identification purposes. The approach controller gives us headings and altitudes to fly and they almost ALWAYS tell us to maintain VFR. Not only is it a reminder that you are NOT on an IFR flight plan, but to state that it is our responsibility to maintain VFR cloud distance and visiblities while operating in their airspace. It also implies that we are ultimately responsible for traffic separation while maneuvering, not ATC. Remember though, whether you are VFR or IFR and in VMC, you as the PIC are always responsible for collision avoidence.
It is conceivable that the two of you can be on an IFR flight plan, where you are safety pilot and acting PIC while in VMC and the other pilot is under the hood. Once you hit some IMC, he can still fly the plane without the hood and log IMC. You on the other hand can not. The FAR's state that actual can only be logged if you are controlling the plane solely by reference to flight instruments.