How do you discipline?

I was recently on a play date with a friend and her son, who happens to be the same age as my daughter (19 months). We were playing at the park and having a grand ole time when it started to get dark and we decided to go home. I picked up Emery and put her in her stroller to walk back while my friend attempted to do the same with her son. He was not ready to leave and was putting up quite the fight. He'd arch his back, push against the stroller, and yell as she tried to get him in. She asked him once to stop yelling and to sit down, and when he didn't listen she popped him on his booty.

Now this got me thinking. I don't believe in spanking a child because they've misbehaved, I think it can just encourage them to hit in return so when she spanked her son in front of me it caught me off guard. I was surprised she was so comfortable doing it, and that it didn't embarrass her to do it in such a public place. I started thinking about how my husband and I had disagreed on discipline in the beginning but how we'd agreed on what to do should the time come. 

Whenever my daughter misbehaves, which is quite often believe me, my husband and I decided that we'd put her in time out. We established a corner of our living room where we have a big floor pillow and that's where she goes. We explain to her why she's been put there and tell her that when she's ready to be a big girl she can get up. She sits there for maybe a minute, but I think it's important to teach her that there are consequences for your actions. She already knows after being sat there 3 times that it's not a fun spot to be. 

Aside from a time out, what are some forms of discipline you use? It breaks my heart to sit her there, she just sits and cries for mama. I just feel like if she doesn't learn this early on she'll be "that kid" in class that gets in trouble all the time for misbehaving. Am I crazy? Do any of you discipline your young children, and if so what do you do?