Connection timeout when sharing internet with password
To try to make things clear let's say you have 2 Mac named:


Alex
Bob


Here is the scheme of your small home network :

Internet --- USB --- Alex --- WLAN --- Bob


If when Bob try to join the wireless network (AirPort or WI-Fi or better WLAN) initiated from Alex,
it gets an immediate rejection, this may be due to a network access
with the wrong security setting.

To check this hypothesis, on Bob, simply go within:

System Preferences… &gt; Network &gt; WiFi &gt; Advanced…


and look at the column Security.

If it is anything else than WPA2 Personal, double click on this network setting to fix it.

If it is already WPA2 Personal, double click on this network
setting to check if the registered password is OK.