Timeout is how long you wait for a response from a request before you give up. TimeOut=0 means you will keep waiting for the connection to occur forever. Good I guess if you are connecting to a really slow server that it is normal if it takes 12 hours to respond :-). Generally a bad thing. You want to put some kind of reasonable timeout on a request, so that you can realize your target is down and move on with your life.
In SQL Server, the remote query timeout option specifies how long, in seconds, a remote operation can take before SQL Server times out. The default value for this option is 600, which allows a 10-minute wait. This value applies to an outgoing connection initiated by the Database Engine as a remote query. This value has no effect on queries received by the Database Engine. To disable the time-out, set the value to 0. A query will wait until it completes.