Google keeps a close eye on us all. They do this both electronically and with the help of their human employees. When they find something out of order with a website, Google will issue a penalty which will drop your website rankings, sometimes significantly. Your site will remain lower in the rankings until the cause is remedied. There are two types of penalties, algorithmic and manual.
As you know, Google updates its algorithms on a regular basis. Every time a change is made there is a chance your site could become out of compliance in some way and have your ranking drop. Some would call these penalties. Google calls them algorithmic updates. In order to recover from the algorithmic update, you need to remove the tactics now deemed to be spammy such as link exchanges or cloaking among many others. If you are now in full compliance, once Google rercrawls your site the search results should return to a more normal position. The question is when Google will recrawl your site. It is anyone’s guess as they don’t have a specific schedule. Be patient and concentrate on creating quality content.
A manual penalty is a different animal. Google defines a penalty as “when a manual action is taken against a site by a human being.” That’s when some human being at Google has reviewed your site and decided that it deserves a penalty. You will know if you have been given a manual penalty because Google will tell you. It is a pretty big deal when this happens but by no means the end of your website as you know it. Most penalties come with a time limit depending on the severity of the infraction. While the penalties will eventually expire, it is best to take action to fix the problem rather than trying to wait it out.
Google gives you a way out. You need to first fix the issue that lead to the penalty. Then you can submit a reconsideration form to Google, which prompts someone to look at your site and see if the issue has been resolved. If so, then the manual penalty may be lifted.