I do time-outs the way Rebecca mentioned once. I sit down (always in the same spot) with Thatcher in my lap. We sit for about one minute, and I quietly tell him no and explain why we're sitting there (even though I don't know how much he understands). He wouldn't understand the concept of sitting alone... he'd be off in a heartbeat! I think Rebecca said Charlotte knows to sit alone for time out now, though, and maybe Janine's daughter Hazel does too.
Thatcher has learned not to do certain things b/c of time out, but it takes many repetitions. With other things, though, it doesn't phase him. The more consistent I am, the better results I see, but it gets exhausting sometimes so I get lazy.