We used go back and forth on this all the time, but for me, tempo is largely responsible for how fast you move the ball around. Time wasting does a number of things, from running the ball to the flag and sitting there, to dithering on throw-ins and free kicks, and having the keeper sit around before taking a goal kick. It also seems to lead to a higher number of fouls, as your team will intentionally 'break-up' the other team's offensive rhythm and cause a higher than normal number of free kicks and restarts that help delay the action. And you seem to get an elevated number of throw-ins, probably because your team is hoofing the ball out, or playing it off the opp player for a time-wasting throw-in more often than normal.
Back in 06, people tended to see higher possession stats when they used high time wasting, leading to the theory that high time wasting causes your players to move the ball around slowly, and only make good, unhurried passes. I never saw anything obvious in the match stats to support that. More likely, as Asmodeous once pointed out, higher possession results might have been because teams were getting credited for possession when its players were standing around, waiting to take their free kick, throw-in, etc., which would be skewing possession higher. This seemed plausible.
The warning in the in-game hints against doing high time wasting too early first appeared in 07, and seems to be a warning about playing overly negative football too soon in a match, as it's the sort of play that doesn't usually help your scoring. But if you're a minnow taking on Chelsea, or you score a shock three inside the first 25 minutes, then it's appropriate to use it early.
It also might be a clarification for the decent sized group of people in 06 who were convinced that high time wasting was essential for a high possession tactic, making it something they advocated using for the whole game, rather than as a kill off the game tactic.
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