Timing is the number of drawings that make up the action, this translates as the timing of the action. For example if a ball was bouncing and was made up of 6 frames, this would be twice as fast as the ball bouncing in 12 frames. This helps create the illusion that objects and characters apply to the law of physics. This also allows you to create the illusion of weight to an object, for example a balloon would float slowly and have many frames, contrasting with a bowling ball which would be the opposite.
You can see below the frames for a bouncing ball, more frames are used as the ball reaches its highest point, showing that like in real life the balls movements would slow at this point before descending down and gaining speed again (using less frames).
Timing is also very important in terms of establishing a characters mood, emotions and reactions.
Exaggeration is an effect especially useful for animators, often a realistic recreation of real life can be static and dull, adding exaggeration can make this a lot more interesting. The level of exaggeration depends on the style the animation, The classical definition of exaggeration, employed by Disney, was to remain true to reality, just presenting it in a wilder, more extreme form.
Here is a quick animation test that I made demonstrating the principle.