What does a lock statement do under the hood?

The lock statement is translated by C# 3.0 to the following:

var temp = obj;

Monitor.Enter(temp);

try
{
    // body
}
finally
{
    Monitor.Exit(temp);
}

In C# 4.0 this has changed and it is now generated as follows:

bool lockWasTaken = false;
var temp = obj;
try
{
    Monitor.Enter(temp, ref lockWasTaken);
    // body
}
finally
{
    if (lockWasTaken)
    {
        Monitor.Exit(temp); 
    }
}

You can find more info about what Monitor.Enter does here. To quote MSDN:

Use Enter to acquire the Monitor on the object passed as the parameter. If another thread has executed an Enter on the object but has not yet executed the corresponding Exit, the current thread will block until the other thread releases the object. It is legal for the same thread to invoke Enter more than once without it blocking; however, an equal number of Exit calls must be invoked before other threads waiting on the object will unblock.

The Monitor.Enter method will wait infinitely; it will not time out.