A Timesink is an artificial method to get you, the player, to play an MMO longer than you normally would. It is hoped that this time investment will translate into extended subscription, but if not handled properly, this can backfire spectacularly.
What’s the difference between a Timesink and a Cooldown? A cooldown lets you do what you want to do immediately (or quickly), but its the act of repeating said action that is gated by time. A timesink puts the wait onto the front end of the equation. Do you need to travel on foot at the slowest speed possible to get to your next quest? Timesink. Once you finish the quest is there a minimum amount of time that must pass before you can get a similar or identical reward? Cooldown.
Timesinks are generally accepted more universally than cooldowns simply because a timesink usually involves you doing something while you are being timesunk. The most common timesinks are travel time, experience earning, and crafting. This can vary from game to game. City of Heroes has practically eliminated travel time as a sink, because there are so many ways to get to where you want to be quickly, and Mission Architect allows you to do story after story without leaving a single building.
Experience earning is another form of timesink. When World of Warcraft was in beta, they had a system where after playing for a certain amount of time, your XP earning rate would be halved, and you could earn back time by logging out or resting at an inn. The outcry on this was immediate. So much so that Blizzard went back to the drawing board and redesigned the system. Or did they? Now, when you log out and/or rest at an inn you earn “rest XP” which effectively doubles the XP you earn until you run out, and then you go back to normal XP. It’s all semantics. If you look at the “normal” XP as half XP, then you have the exact same system that they started with, only put in a more user-friendly way. My friends and I would joke about how in Dungeons and Dragons Online you got 150% XP for doing a dungeon the very first time. Turns out the math is the same if you say “you get 66.67% XP for every time after the first.”
Crafting is also a great timesink that many MMOs rely on. First, you need to gather materials. A good timesink will put these materials in the vicinity of where you are, but you need to go out of your way to get them (WoW’s nodes, Star Trek Online’s sensor anomalies). MMO’s are all about aggregates. A couple seconds here and a couple seconds there adds up quickly over time and soon you have spent an hour just gathering materials for your crafting habit. After you have gathered the required materials you (usually) have to go to a specific point of world geometry to craft (a “crafting station“). That takes time, next you have the act of combining the materials which can be a multi-step process (which Star Wars Galaxies nailed practically as an art-form). Finally you have your crafted result.
No game should ever have a timesink for timesink’s sake. A good timesink has you interacting with the game on some level, earning some level of enjoyment or moving the story along. It might be “realistic”, but keep in mind that you are trying to entertain people here and useless timesinks tend to do the opposite of entertain. Always consider a cooldown if your timesink is boring. At least with that, the player is free to do whatever else they want while waiting on their gated content.