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.