It is similar to smacking in the sense that it is a generic punishment which is unrelated to the crime. Of course it's different in the sense that it's not painful or frightening (unless the child is still having separation anxiety in which case it might be frightening).
I don't like calling it a "naughty" step and insisting on apologies, dwelling on what is wrong etc - that's basically how Supernanny dressed it up to make good TV and I don't like that approach. It feels very "punishment-y". Which is why some make a comparison to smacking. If you're intending for it to be unpleasant then yes it is similar.
Time out is different because it's removing a child from a situation to calm down. You don't worry if they are having a nice or a boring time, you don't intend for it to be something specifically unpleasant, (though you prob wouldn't go out of your way to make it nice either) you might not leave them alone. It might look similar but the underlying aim is different and this is key.
I think the model of good behaviour = reward and bad behaviour = punishment is hopelessly outdated and simplistic and anything which is based solely on this won't work. Even positive parenting which is overload of praise/reward for any good behaviour and ignoring bad. That doesn't really work either. Neither does endlessly swapping one generic punishment for another as soon as it becomes unfashionable (smacking < naughty step < removing privileges or whatever)
Because if you think about it, what's the purpose of a punishment anyway? It's either to communicate "I don't like that", in which case, there are myriad other ways to communicate, including saying "I don't like that", prevention, literally stopping them in their tracks and distraction if they are too little to understand words and reason. Sometimes it doesn't work to just say stop and why, but sometimes it does. Don't dismiss it out of hand.
Or it's a deterrent. You make the threat so that they hopefully don't want to even attempt it, or you immediately punish so that the associate the action with something bad. But again you can do this in other ways. You can directly prevent the behaviour or make it very difficult, you can make the alternative and wanted action an easier choice or more appealing, you can explain exactly why something isn't okay, you can also make the deterrent directly related, like having to clean up their own mess, pay for damages, apologise directly to a person they have upset, etc. Or (radical idea here) instead of stopping/preventing them from attempting something, make it safe for them to attempt, meet them halfway or let them try it and find out what happens for themselves, especially if it's likely to put them off or (conversely) if they might actually manage it, obviously depending on what it is.
Sometimes you need to stop something immediately. So stop it immediately. Remove them from the situation, perhaps with a short explanation, then that's it. You don't need to add something else onto it like an arbitrary time limit or a humiliating name or something intended to be painful/unpleasant. I would also agree with removing an item (for example) which is being used inappropriately or removing a privilege which is not being respected (for older children). This is an appropriate protective measure by parents, rather than a punishment - the aim is different, again. When you ground them to stop them crossing a dangerous road you're preventing them from going to the road unsupervised. When you ground them for swearing you're not preventing them from swearing.
Then the last purpose of punishment is some kind of payback. If it's actually making a situation which they caused better, then this is good. If it's just to make you feel better or because you feel they "deserve" something bad to happen then, um, no. That's just called taking your children's behaviour personally and seeking revenge, and it should have no place. IMO.