How do you get a tamagotchi to have timeout?

(I'm answering for a v4, so I can't be sure about the others)

Scroll through the icons on the tama's screen by pressing the 'A' button, the button on the left. The icon looks like a talking pacman. (Really, it looks like a pacman with 'speech lines' coming out.) Press the 'B' button- the one in the middle- to select. Two options will appear: Timeout and Praise. Make sure the arrow is pointing to 'timeout' and then press 'B'.