This is happening because there is an unhandled exception in your Web service, and the .NET runtime is spitting out its HTML yellow screen of death server error/exception dump page, instead of XML.
Since the consumer of your Web service was expecting a text/xml header and instead got text/html, it throws that error.
You should address the cause of your timeouts (perhaps a lengthy SQL query?).
Also, checkout this blog post on Jeff Atwood’s blog that explains implementing a global unhandled exception handler and using SOAP exceptions.