Source : Webster's Revised Unabridged Dictionary (1913)

Penalty \Pe"nal*ty\, n.; pl. {Penalties}. [F. p['e]nalit['e].
   See {Penal}.]
   1. Penal retribution; punishment for crime or offense; the
      suffering in person or property which is annexed by law or
      judicial decision to the commission of a crime, offense,
      or trespass.

            Death is the penalty imposed.         --Milton.

   2. The suffering, or the sum to be forfeited, to which a
      person subjects himself by covenant or agreement, in case
      of nonfulfillment of stipulations; forfeiture; fine.

            The penalty and forfeit of my bond.   --Shak.

   3. A handicap. [Sporting Cant]

   Note: The term penalty is in law mostly applied to a
         pecuniary punishment.

   {Bill of pains and penalties}. See under {Bill}.

   {On}, or {Under}, {penalty of}, on pain of; with exposure to
      the penalty of, in case of transgression.

Source : WordNet®

penalty
     n 1: the act of punishing [syn: {punishment}, {penalization}, {penalisation}]
     2: a payment required for not fulfilling a contract
     3: the disadvantage or painful consequences of an action or
        condition; "neglected his health and paid the penalty"
        [ant: {advantage}]
     4: (games) a handicap or disadvantage that is imposed on a
        competitor (or a team) for an infraction of the rules of
        the game