When Google announced the “Penguin Update” they officially called it an algorithm-change which was supposed to stem the tides of webspam.
In the next few days, we’re launching an important algorithm change targeted at webspam.Matt Cutts
During the announcement, Google did not mention that the update was called Penguin. Therefore it was generally known as the “Webspam Update”.
Seeing how Google had already been fighting webspam for a long time and did not just start with this update, Danny Sullivan, chief editor of the industry-blog Search Engine Land, looked for a more fitting name for this significant algorithm update.
Upon asking the community, the name “Titanic” entered the game, whereupon Google decided to publish the name they themselves used internally: “Penguin”.
The following Twitter post by Matt Cutts is supposed to be Google’s acknowledgement of the name Penguin:
Noteworthy source on this subject: