Fourth seed Williams lasted just four minutes in her night match against German Andrea Petkovic on Rod Laver Arena before the leg strain she sustained in the second round flared up.
Henin, like Williams a seven-times grand slam champion, was still clearly hampered by the elbow injury that wrecked her 2010 campaign as she bowed out 6-4 7-6 to Svetlana Kuznetsova.
An injury withdrawal also helped men's third seed Novak Djokovic through to the fourth round as fellow Serb and Davis Cup team mate Viktor Troicki pulled out during their match.
Defending champion Federer, playing in his 45th consecutive major and seeking a 17th title, knows exactly what it takes to get through to the business end of the majors and he showed no ill-effects from his late night fright against Gilles Simon in the second round to dispatch Xavier Malisse 6-3 6-3 6-1.
I'm okay today, and I'm happy I was able to come through it, said Federer, who will next meet Spain's Tommy Robredo.
Surely not the easiest thing to come back after a five-setter, but I managed. I'm sure that another day of rest is going to do me good (but) I would have been okay playing another one today, no problem.
I always said you can't win a grand slam in the first week but you can lose it, he added.
Williams, whose defending champion sister Serena missed the tournament through injury, said she had hoped for some magic to allow her to play after hurting herself on Wednesday.
However, she quit after just seven points.
I just obviously couldn't play, she said. I mean, just couldn't move. Just too painful ... A lot times when you play you get this adrenaline that blocks pain. But I just didn't get enough of that today.
Her departure leaves a grand slam without an American woman in the last 16 for only the fourth time, the last time being at the French Open in 2008.
Henin, who made a fairytale run to the final last year on her return from retirement, made her earliest exit from Melbourne Park in 11 visits.
The 2004 champion racked up 41 unforced errors and even her Russian opponent's late nerves could not save her.
It's disappointing to lose like this, said Henin. She was just better than me, especially in the important moments.
Kuznetsova's reward was a tie against her friend and French Open champion Francesca Schiavone after the Italian beat Romanian Monica Niculescu 6-0 7-6.
We have a great friendship, the Russian said of Schiavone. But we are both athletes. Out on court we're animals and kind of fighters against each other.
Henin's departure leaves Maria Sharapova as the only former champion in the women's draw.
The Russian, seeded 14th, made hard work of beating German Julia Goerges 4-6 6-4 6-4 but said she was delighted with her fitness after a 2 1/2-hour win set up a meeting with Petkovic.
Djokovic, who like Sharapova is trying to emulate his 2008 triumph here, saved some energy when Troicki retired with a muscle strain after losing the first set and hopes that will stand him in good stead for the challenges of the second week.
They are physically very fit and mentally very strong, he said of Rafa Nadal and Federer who will stand in his way. It seems like they're raising their level of performance in the second week of the grand slams.
Gael Monfils paid the price for playing nine sets in his first two rounds as the French 12th seed went out 7-6 6-2 6-3 to Swiss Stanislas Wawrinka.
Spaniard Fernando Verdasco, however, brushed off his five-set second round thriller to beat Japan's Kei Nishikori 6-2 6-4 6-3 and set up a fourth round meeting with Czech sixth seed Thomas Berdych, who cruised past Richard Gasquet 6-2 7-6 6-2.
Women's world number one Caroline Wozniacki moved comfortably into the fourth round with a 6-4 6-3 win over Dominika Cibulkova before having a bit of fun with the media.
The 20-year-old Dane took charge of her post-match press conference, giving the answers to stock questions before they were asked before asking for more interesting inquiries.
She then held court on topics as diverse as Liverpool soccer club and global warming but inevitably the questions over her legitimacy as No.1 without a grand slam title.
I feel like I deserve to be there, she repeated. I've done so well last year, and hopefully I can continue my roll this year. I know that you guys have to write about something, and that's a pretty good question to ask.