A Google penalty is a negative impact on the rankings of your site. Either a penalty can be due to manual review or Google updates algorithms. A telltale sign that your site has been penalised is a sudden plummeting of your ranking and traffic.
It’s impossible to know that a site has been penalised by simply looking at it. For example, Google updates such as Panda are pretty noticeable via traffic reach.
If your site has been penalised by Panda you will experience a sharp, but gradual decline in web traffic. Your pages will also have problems ranking regardless of the number of links that you add to them.
Or another Google update, aka penguin. This is another common penalty that targets sites with unnatural links. When your site is affected by penguin you will find that your keyword or a group of keywords have greatly dropped in rankings. In most cases the page or pages containing the keywords may be de-indexed.