When the player presses 'alt' he stops sending packets to the server.
The server then stops processing anything done to the player.
Aka invincibility.

The player can effectively in PVP run into a huge gang, Press 'alt' and.. Well. Get the server owners very pissed off as people are complaining about the hackers who are invincible.

In a small server this may be fine.. A large server? Too many players to ban for abusing this.

This feature should only be available in Single Player as it effects survival very badly.

Fell off a cliff? Server is a death ban and a npc spawns when you log?
No problem bro. Just press alt and get your friend over with a bucket of water!

Fell in lava? No problem! Want to survive each round of a survival games? No problem! Press alt and check back regularly to see how much money you been earning for surviving!

Players have been abusing this like shit in a Hungergames style server.

The last few people to survive are rewarded money. Guess how many naked guys are sitting around spawn while diamond guys are prancing around them trying to hit them. And guess how many of the diamond guys lose their spot in the rankings to that naked player..

Even sticking in a 'timer' or 'countdown' in which they are d/c wouldn't help.
They could just press 'alt' every 20 seconds.

Then if you made it lower. The feature is now redundant.

The only good thing about this whole issue, They can't auctally see whats going on in the game without another account.

And yes. This is more then easy for a hacker client to do. One hacker client to 'alt', The other client is just looking around for when the path is clear to move around again.