Timeouts work differently depending on how you use them. Sending a child away in anger or shame damages the relationship, but a brief, calm reset where you reassure them of your love can help both of you settle down.
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Timeouts are a strategy of taking attention away from a child who's acting out in some way. The assumption is that they're just trying to get attention with their behavior and making them go to their room or sit in a corner by themselves will give them the opposite of what they're looking for and therefore discourage this behavior. Let me first make a distinction between what I consider a harmful timeout versus a non harmful timeout. If you feel your child is misbehaving and you get angry with them and send them to their room and in any way make them feel like they're bad, they're not welcome in your presence, they have to go away until they behave. I would argue that this is harmful and it is also going to stop working over time. If, however, things are going wrong with your child's behavior and you just use a little space in order to reset the situation, to take a breath yourself, all while communicating to your children that everything's going to be okay, you love them. Maybe we just need some space for a minute to reset things. I don't believe that that is harmful.