That's only if a query is waiting for memory. Further quoting from Books Online.
In Microsoft SQL Server, memory-intensive queries (such as those involving sorting and hashing) are queued when there is not enough memory available to run the query. The query times out after a set time calculated by SQL Server (25 times the estimated cost of the query) or the time specified by the nonnegative value of the query wait.
So if that's set to say 30 sec, it won't force a query to stop running after 30 sec. It will only make a query that's waiting for a memory grant fail after waiting 30 sec. This is similar to the lock timeout, how long SQL will wait for a lock to be available before failing the query.
It is not a generic query timeout.
Gail Shaw
Microsoft Certified Master: SQL Server, MVP, M.Sc (Comp Sci)
SQL In The Wild: Discussions on DB performance with occasional diversions into recoverability