Yes, the car is making noises when you don't hold the wheels and after 3 warnings, the Autopilot system is disabled until the car is restarted. The Autopilot is very explicitly not suitable for unobserved operation.
How do people sleep or play on their phones then? Are the warnings not frequent and prominent enough? Are people hacking it and disabling it? What's the deal here?
With a Tesla you hang a banana off the steering wheel. The weight tricks the system into thinking it is a hand.
With GM's Super Cruise you can go completely hands free, that's the intended use, but it has eye tracking to make sure you are constantly watching the road.
The car detects your hand on the steering wheel. So technically speaking, as long as you keep one hand on the wheel, you can use your phone with the other hand :p. There are also devices avialable for purchase, which convince the car that there is a hand on the wheel.
What I forgot to mention in the previous post: the autopilot does not only complain about hands off the wheel, but if you ignore the complaints long enough, it does stop the car. So people can't drive for long with their hands completely off the steering wheel, until they use some kind of defeating device.
You just need to bump the wheel every 15 seconds or so. The required interval seems to vary a certain amount, but in boring, easy, bumper to bumper traffic, where it makes the most sense, that's all that's required, in my experience at least.
> it does stop the car
More specifically: in my tests, it eventually disengages autopilot as well as adaptive cruise control (which only controls the break and acceleration) while beeping loudly and harshly. This has the affect of slowly causing the car to decelerate.