Disabling / enabling SSH timeout

Read from remote host ariel.localhost: Connection reset by peer
Connection to ariel.localhost closed.

There are two ways to prevent SSH from timing out when left idle. The first is on the server, the second on the client. Both require editing the SSH config file.

The configuration is split between two files: On Linux, /etc/ssh/ssh_config and /etc/ssh/sshd_config. On OS X, they tend to reside in /etc/ssh_config and /etc/sshd_config. ssh_config is the configuration for the SSH program itself on the client, while sshd_config is the configuration for the SSH daemon on the server.

On the server machine uncomment, or add if it does not exist, the line:
ClientAliveInterval 60

On the client side, the line is:
ServerAliveInterval 60

The interval is in seconds, so you may specify any time period you like. On the server side, this defines the timeout interval after which no data has been received from the client that it should send a quick poke to request a response from the idle client. If the interval is set to 0, or the line does not exist, these messages will not be sent.

Similarly, on the client side, the interval is how often it should send a message to the server indicating that the connection is still active.

You must restart the sshd daemon after editing the file.
On Linux:
/etc/init.d/sshd restart

and on OS X: launchctl unload /System/Library/LaunchDaemons/ssh.plist and
launchctl load /System/Library/LaunchDaemons/ssh.plist

You can also restart sshd on OS X by unchecking and rechecking the box in System Preferences: