Timeout is an invisible flag that is 'created' when the timeout count reach 0. Another example:
NPC Code:
if(playerenters){
timeout=5;
}
if(timeout){
say2 Chasam;
}
When timeout be 0,it will 'create' the flag and will execute the code inside that timeout block.
By the way,Kaidaman,timeout & sleep aren't the same thing and won't execute the same thing as you said.