So far as I can tell, the main target of Penguin has been to penalise use of spun links where these dominate a site's link profile.
A URL with minimal spun links as little affected, but where spun links dominate, keyword rankings crash.
I say URL and not domain because I've tested this with subfolders and these can be hit much easier than a homepage.
The scary thing is that normally Google simply devalue what they perceive as low quality links. Now it appears that low quality links carry an active penalty.
From what I've seen so far, it should be pretty easy to take out general SME websites, or at the very least major categories on them, with nothing more complex than a $40 pligg blast.
Pandora's box has opened.