I rarely use timeout for my daycare kids. If I do, it's because we just need a break from that child. Either he or she is actually picking on another child, and the victim deserves a few moments to start a new activity without the bossy kid interjecting him or herself.
Or just because *I* need a break from the child.
But, as a learning tool, I don't think it works. It's just a breather. I think with six full time kids, timeout gets used a total of four times in a year. So, some kids have never had a time out in their lives.
Our worst punishment is "placement of nap mats". We watch a movie at nap time, and there are good nap spots, and bad nap spots. If a child is having a bad day (doing things he or she knows is not O.K) then he or she must reallllly need a nap that day, so we put the mat farther away from the tv, and the other kids. The kids who have made better choices, are clearly not as tired and sleep in front of the tv, and close to each other.
In reality though, the kids who are having a bad day, really DO need to nap that day, so it's good all the way around. They can still see the tv, but not as easily, so they usually just fall asleep.