Explanation
Timeout (in milliseconds) sets the amount of time an IP SLAs operation waits for a response from its request packet. In other words, the timeout specifies how long the router should wait for a response to its ping before it is considered failed.Threshold (in milliseconds too) sets the upper threshold value for calculating network monitoring statistics created by an IP SLAs operation. Threshold is used to activate a response to IP SLA violation, e.g. send SNMP trap or start secondary SLA operation. In other words, the threshold value is only used to indicate over threshold events, which do not affect reachability but may be used to evaluate the proper settings for the timeout command.
For reachability tracking, if the return code is OK or OverThreshold, reachability is up; if not OK, reachability is down.
This
tutorial can help you revise IP SLA tracking topic:
http://www.firewall.cx/cisco-technical-knowledgebase/cisco-routers/813-cisco-router-ipsla-basic.html and
http://www.ciscozine.com/using-ip-sla-to-change-routing/
Note: Maybe some of us will wonder why there are these two commands:
R1(config)#ip route 0.0.0.0 0.0.0.0 172.20.20.2 track 10 R1(config)#no ip route 0.0.0.0 0.0.0.0 172.20.20.2 In fact the two commands:
ip route 0.0.0.0 0.0.0.0 172.20.20.2 track 10 ip route 0.0.0.0 0.0.0.0 172.20.20.2 are different. These two static routes can co-exist in the routing table. Therefore if the tracking goes down, the first command will be removed but the second one still exists and the backup path is not preferred. So we have to remove the second one.

Explanation
The first ACL statement of "10 deny ip any any" will match and drop all traffic so we have to remove this statement.