A rating floor would keep a persons rating from dropping more than a certain number of points or percentage. It could be designed to put a break on the fall in ratings one might experience due to getting a stream of losses due to time-out.
Consider the following game: Game 1271049
This was a game from the "July Hardcore Grand III" grand between Peter9 (rated 2214) and Coynio (rated 767). You'd expect it to be an easy win for Peter9. But it looks like Coynio help up well for a low rated player. But look at Coynio's rating history.
Now I'm thinking what if I were playing Coynio. It's is possible (even likely) that Conynio would beat me. And for that I'd take a significant rating lose (my rating is 1215 at this time). And if I won, my rating would barely move. This is why I think some sort of rating floor or method of slowing the lose due to timeouts would be a benefit.
Clearly Coynio's a better player than his (her) rating indicates. If I ever played him, win or lose, the effect on my rating and his should reflect that.
As for Peter9, well there's no question who'd win so I won't go there.