It is really important to be clear about terminology in this subject. Timing out is a normal expectation in blitz games. Cases in which people disconnect and consequently time out are called “escaping” or “abandoning.” These cases are prohibited by the TOS as “timewasting.” There are also, more rarely, cases of people deliberately timing out while they remain connected. This generally occurs in games with long maintime, when players want to waste more of their opponents’ time or want to cheat by driving their opponent to resign in frustration. I refer to this as “deliberate timeout.”
Legitimate timeouts can also occur as the result of server issues and simply thinking too long, even in non-blitz. I myself have timed out on two occasions in IRL 9x9 games (5x30 byo-yomi) because I lost track of the time.
It is important not to assume in any case that there are no penalties, just because the penalty is not generally visible. People who escape or deliberately time out receive one or more warnings depending on circumstances, and they are banned from OGS if they persist. The moderation team issues a large number of warnings every day, and we ban someone for these offenses probably once every 2 or 3 days.
People who don’t show up to play a game are a different issue (except that they should cancel rather than escape and will be warned if they escape). Game creators are allowed not to play the games they create, so long as they are not trolling. This is because they have no opportunity to vet their opponent. In contrast, someone who accepts a challenge is expected to play. Players who persistently accept a challenge and don’t play are regarded as cancellation trolls. They get one warning and then get banned if they persist. These trolls are much more common than one might think.