In a RTC project Area the timeline is the way to define the development schedule for your teams. You divide the timeline into smaller chunks, the iterations, and you are able to set up a hierarchy of iterations on the timeline. If you have defined a timeline in that way (i.e. with releases, iterations and sub-iterations etc.) every team that is connected to that timeline has to use these iterations and has to follow the dates established in the iterations. If you have teams that should follow a different schedule you should set up a separate timeline with iterations that follow another iteration schedule. In defining a team it is than possible to connect the team to the new timeline and then the team can work with the iterations defined in that timeline. The timeline (with the iterations) and the teams are important for creating plans. The basic configuration items of a plan are 1. The owner, i.e. the team and 2. The iteration. So to see the right thing in the plans the team and the iteration should be connected and the connection is the timeline.

Hope that helps,

Henning

In the 'Planning a Work item for an Iteration' section of An overview of Project Fundamentals in RTC article, I think there's 1 picture which summarizes this pretty well ... hope this helps.