To Time Out or Not To Time Out

We've been talking discipline in the house lately -- as Henry gets deeper into his toddler time, he's starting to test the waters in terms of what he is and is not allowed to do. Of course, kids this young have no impulse control, so it's foolish to expect them to not do something stupid. But it's doing it more than once that we're worried about -- or, more accurately, doing it after he's been told not to. The little punk's favorite technique now is, after he's been told not to touch something, to either: a) lean in extremely close and put his face millimeters away from the object in question, but not technically touching it, or b) find a handy object and touch the forbidden thing with it, all the while looking at me like the cat that ate the canary. So we're trying to figure out how to introduce discipline into his life. He has a basic knowledge of causality and one thing leading to another, but we're sort of torn on what to do after he does something that he knows is bad. The standard wisdom seems to be the ol' time out, but he just starts laughing whenever we put him in one. I was talking to my sister (who has three kids) and she says that she never uses the time outs -- instead, she tries to redirect their energy to something else. She says that she thinks that traditional discipline is too reactive, and she tries to be more proactive. We were also reading Your Baby and Child by Penelope Leach, which also pooh-poohs time outs, instead recommending that parents "time in," in a way, by holding the misbehaving child in a close hug until they calm down and act rationally. This seems sensible to me -- instead of punishing your child by ignoring them, you stay with them and make yourself more available -- but does it really work? If a kid is acting out to get attention, isn't this just rewarding that behavior? We haven't made a decision as to what we're going to do yet. I think we'll just take it as it comes, and do what feels right based on the offense. Whether that be time out, long hugs, or some as yet undetermined third option only time will tell. What works for you?