the act of punishing
"The coach decided to give a penalty for the player's unsportsmanlike conduct during the game."
a payment required for not fulfilling a contract
"The company was forced to pay an exorbitant penalty after they failed to deliver the software by the agreed deadline."
the disadvantage or painful consequences of an action or condition
"neglected his health and paid the penalty"
(games) a handicap or disadvantage that is imposed on a competitor (or a team) for an infraction of the rules of the game
"The referee handed out a penalty to the soccer team after their player kicked the ball dangerously at the opposing goalkeeper."
A legal sentence.
"The judge handed down a harsh penalty for the theft, sentencing him to five years in prison."
In plain English: A penalty is a punishment given to someone who breaks a rule or does something wrong.
"The referee gave the opposing team a penalty for touching the ball with his hand."
Usage: Use penalty to describe a punishment or fine imposed for breaking a rule, law, or agreement. Do not use it to refer to a general disadvantage or difficulty in a situation.
The word "penalty" entered English via Middle French and Latin, where it originally meant a fine or punishment imposed for wrongdoing. Its ultimate roots trace back to Ancient Greek, where the term referred to a penalty paid as satisfaction for an injury or offense.