From the help files:
http://support.chess.com/index.php?_m=knowledgebase&_a=viewarticle&kbarticleid=683
"Timeouts occur when you lose an Online Chess game by running out of time. When joining a tournament you must have a 10% or less Timeout percentage as we do not want players joining tournaments who are likely to abandon and delay the event. To lower your timeout percentage you will need to play more Online Chess games and then complete the games without losing on time. As you continue to complete more games your timeout percentage will decrease."
In other words, it's the percentage of your games that have ended due to you not making a move within the prescribed time (say 3 days)....hope this helps
what is a time out ratio?