Lots of great ideas here.
I will try to describe how I have done time-outs. My younger son is 12 and has Tourette Syndrome (TS) and ADHD. Hopefully this rather extreme case gives you some ideas.
The three main influences for me in developing my approach have been:
I read about attachment disorders in children and how to deal with them (out of curiosity -- not because anyone in my family is affected by this)
A family therapist gave me the basic approach when my younger son was about 3
My son -- I've learned so much from him!
I think it's helpful to have a clear goal underlying the time-out. I use time-out mainly as a way for my child to regain some measure of inner self-control. When he comes out of time-out, he's more in touch with himself and more in control. Instead of just riffing off others.
What I got from reading about attachment disorders was the concept of a time-out as a period of exclusion from family life. I read that the time-out chair should be in a place somewhat removed from the main action, but still in sight and hearing of the main action. The idea was for the child in time-out to feel excluded and left out (and briefly miserable!). There's still a relationship connection -- but there's absolutely no interaction.
My time-out chair is a small green chair with a woven wicker seat that lives at the edge of the kitchen. There are no toys or interesting objects in the vicinity. My son is not allowed to take anything with him to the green chair.
In the beginning I had a triple hour glass gadget that had a different color for each hourglass -- for one minute, three minutes and five minutes. That was the suggestion of the family therapist. She wanted it to be very visual. For the first few years it tended to go as follows:
This example has to do with my son's proclivity to interrupt constantly at dinner, making it impossible to have any kind of conversation at the dinner table. At the first interruption, I reminded him of the expectation. The next time he interrupted, he was put in time-out for one minute. To put him in time-out, I would say, "Green chair, one minute. One... two... three." If he wasn't sitting in the green chair yet by the time I said "three," I would escalate: "Green chair, three minutes." I only rarely had to get to five minutes.
When my son was younger and I was angry or wanted to be theatrical, sometimes I marched him to the green chair, holding his arm firmly. More as an expressive tool, than as a way of forcing him to go. Basically, he knows he has to go there and sit down because if he doesn't, he'll get more time.
The rules for the green chair are, you have to sit quietly without playing with anything. Other family members have to be supportive by not interacting with the child in time-out.
If he talked while in the green chair, his time requirement started from the beginning again. In practice this meant that he would get a little more than a minute, because after flipping the egg timer back, I had to wait for the sand to run back to the starting point before saying, "begin."
If he got out of the green chair prematurely, he had to begin again from the beginning.
I made sure my son understood what he was in time-out for (if I thought there was any doubt) -- but not until the prescribed time was up. This was not usually necessary.
I tried to avoid a lecture, and just move on with life when the time had been served.
Nowadays I don't give many time outs, and when I give them, it's usually for 10 or 20 seconds, because that's generally enough time for him to get himself together.
When I found out about the TS, over those first few months I had to sort through my set of behavior expectations and pick a few to continue to enforce. For example, I no longer put my son in the green chair for saying, for example, "You stupe" or "Shit shit shit shit shit." Those are tics, which he can't control. But I will still say, if he's balking at putting away the dishes, "You can put away the dishes now, or you can sit in the green chair and THEN put away the dishes."
I rarely use the green chair nowadays, and when I use it, I usually keep it extremely short -- sometimes 10 seconds, sometimes 20, sometimes 30. I think the longest I've given in the last 12 months has been five minutes -- that was a special case. (I think I needed a few minutes to calm down, or something.)
Everyone has their own internal clock. I think you have to figure out how long of a time-out is right for each child.
My older son is usually away at college now, but when he was in high school, I sometimes had to send him to a time-out around the corner from the kitchen, in the entry-way, where we put our coats on hooks. He could hear family life going on without him, but we couldn't see him. If I had him do his time-out at the edge of the kitchen, like the younger one did, he would make provocative faces, when I wasn't looking, and set the younger one off.
The older one's time-outs were usually at least five minutes. I didn't time them. I just went over to the entryway to review expectations and release him when I remembered. (He wasn't allowed to release himself from time-out. I had to review expectations because I didn't want a repeat performance of what had gotten him into time-out. Most of the time-outs were for provoking his younger brother, which he was able to do in a variety of creative ways.)
Nowadays, when my younger one (the one with TS) is really out of control, I focus mainly on helping him slow down his breathing. Then when things have calmed down, we can talk about what happened. If he said something that offended me, or if he threw something, I give him an I-message, for example, "When you say 'you stupe' in this sort of context, it sounds like an insult, more than like a plain tic, and I feel insulted." Then he apologizes.
When I need my son to hand over something like a toy that's interfering with getting ready for bed, I'll say, "I'm going to count to 3 and then I'm taking the toy." After I say that, I hold out my hand. This gives him the opportunity to be in control.
Sometimes I say, "Okay, what you need to do before we do (some fun thing) is get into pajamas and practice piano. Which do you want to do first?" If there's no answer, I say, "I'm going to count to three, and then I'm going to decide for you. One... two... three. Piano." (That's if he doesn't decide for himself before I get to 3.)
I try to be pretty consistent with my counting speed.