After a period of time (I don't know the exact increment but I'm confident that it's small) NT will notify SQL Server that there has been no activity on the IPC channel. SQL Server will terminate the connection and rollback any open transactions.

>What exactly does SQL server do when this happens?

SQL Server uses the information in the transaction log to undo all the changes made since the transaction was began. In addition, any exclusive locks that were applied while modifiying data will be released.

-Mike