setTimeout callback argument

Your question really has nothing at all to do with setTimeout. You simply need to understand the difference between a function call and a reference to a function.

Consider these four assignments:

var one = function() { mike.showName(); };
var two = mike.showName;
var three = mike.showName();
var four = (function() { mike.showName(); })();

The first two assign a reference to a function to their respective variables. The last two, however, call functions (that’s what the parens are for) and assign their return values to the vars on the left-hand side.

How this relates to setTimeout:

The setTimeout function expects as its first argument a reference to a function, so either one or two above would be correct, but three and four would not. However, it is important to note that it is not, strictly speaking, a mistake to pass the return value of a function to setTimeout, although you’ll frequently see that said.

This is perfectly fine, for example:

function makeTimeoutFunc(param) {
    return function() {
        // does something with param
    }
}

setTimeout(makeTimeoutFunc(), 5000);

It has nothing to do with how setTimeout receives a function as its argument, but that it does.