A penalty is the sanctioning of a website by Google. The reason for punishing a website is because of a non-compliance with the Google Webmaster Guidelines.
Google penalties come in two flavours, manual- as well as algorithmic-penalties.
Both kinds of penalties have almost the same effect on a sanctioned website:
- Ranking positions fall massively
Loss of top placements after receiving a Google Penalty
- The Visibility Index takes a massive hit
Loss of visibility for the domain because of a Google Penalty, B: Panda Update #23 C: Penguin Update 2.0