Well, there are all different ways of being penilized, Just try to follow there TOS and you should be fine~
your pr bar will go grey for serious infractions, meaning that google has found your site so bad/in extreme violation and thus, has removed you from their index
If you are banned then a search for site:www.yoursite.com will return no results. Alternatively you may just see your traffic reducing but thats not neccesarily a penalty.
Hello Daworm, Google penalyzation doesn't depend on the down in the PR. There are many other factors responsible for penalyzation. like bad links, duplicate design & content, report spam, found impmenting website for Google results. If you want to find wheather you website is blacklisted or not then search this in Google.com site:www.yourdomain.com if you see your webite web pages indexed then no need to worry about that, you are safe. If the webpages are not there then you should take proper action towards the issue. First of all you will require to match google guidelines for webmaster and change website according to their guidelines. ask google personally about the website penalization. For more info about your website. You can PM me ur URL INFO
You can check if your PR bar is grey....Penalizing by Google had nothing to do by making the PR going down, you are penalize if you did something wrong (black hat)...'coz Pr is based only in quality links of the site...