Hi Sara,
I have a son who's almost 2, we don't use time outs. Only because I don't think it's an effective tool at that age (at least with my son...it might work for others, but each child is different), but rest asured, when he gets older I'll be using time outs. They are still at an exploritory age and wouldn't understand why they are being put in time out or the purpose of it.
We use the word "no" alot and do explain why not....he understands, we can tell, because when sometimes we say "no" he still tries to test us.. He thinks it's a funny game...."what will mom and dad do if I keep on doing this". We continue to say no and stay consistant and explain why and then we remove him from the situation. Sometimes he throws a tantrum, but we ignore them and he knows he doesn't get attention from them, so he rarely throws them.
We've also come to the realization, if we say no to something and he keeps doing it, we just need to let him learn that he'll get hurt Basically, pick your battles (this was hard for me to learn)....of course we don't let him do the extreemly dangerous things, like touch hot stoves or play with broken glass or anything like that. But for example, when messing around on the couch we tell him not to roll around like that or he'll fall..if he keeps doing it, we let him fall off the couch...he's old enough where it won't hurt him (strong enough neck ect), just a shock and maybe a small bump of the head on the carpet, but he learns then not to roll around on the couch or he might fall off and he becomes more careful and listens the next time we say no to that.
Hope this helps.