A "time-out" or "time-in" should not be considered a punishment. A time-out should be a way for the toddler to have space think about what he did. Time-outs set the toddler away from the situation, person or object causing the problem. After the time is up, talk with your toddler about what just happened. A time-in is similar to a time-out, but instead of sitting the child by himself, you sit down with him. While you sit there with your child, try to soothe and comfort him. When he has settled down, you can talk about the situation with him and try to make him understand why he was given a "time-in."
We are presented with choices every day, so why not give toddlers some choices as well? Presenting choices to your toddler gives her a sense of responsibility and teaches her that she is entitled to her own opinions. Giving a toddler the choice of "wearing the green shirt or the red one" teaches her discipline, respect and demonstrates your trust toward her.
Setting verbal and physical limits with toddlers is very important. Toddlers usually have a daily routine, but you must be consistent with this routine. Verbal limits let the child know that problems can be solved by talking it over; this is done with the tone of your voice. A physical limit is a follow-up to a verbal limit. For example, you child is drawing on the wall; you stop him from drawing on the wall with your words, therefore setting a physical limit.
Letting your toddler suffer the consequences may sound a little extreme, but under appropriate and safe circumstances, it can be a great resource for parents. Children, much like adults, learn from mistakes and try to avoid them the next time they come across the same situation.