So I have two equations:
$$ x^2 + y^2 - z^2 = 1/2 $$ and $$ x^2 + y^2 - z^2 = -1/2, $$ which represent single-sheeted hyperboloid, and a two-sheeted hyperboloid, respectively. How do you explain how this different sign has this effect on the level surfaces?

The best way is to look at level surfaces at constant $z$. At $z=1/2$ you get $$x^2+y^2=3/4$$ for the first one, and $$x^2+y^2=-1/4$$ for the second one. The first one therefore has a circle as the level surface, while the second has no solution, which disconnects the graph. For larger values of $z$ you do get a circle for both, but the fact that there are values of $z$ for which no solution exists makes the second graph disconnected, into 2 sheets.