As I summarized at Search Engine Land a minute ago, Google’s Matt Cutts answered a question that I don’t think was clearly answered by Google before – “When are penalties lifted?”

Here is the video answer from Google’s Matt Cutts:

As I summarized at Search Engine Land, there are two types of penalties.

Manual Penalty
Algorithmic Penalty

If you are impacted by a algorithmic penalty, if you change your site, after they recrawl, most of the time, you should pop back up.

On the manual penalties, the penalties “time out” and “expire.” The length of the penalty is based on how severe the penalty.

You can also do a reconsideration request, which would expedite removing a manual penalty. But a reconsideration request will not help you with an algorithmic penalty – you would need to fix your site to fix the issue.

There is a WebmasterWorld discussion around the topic. As Tedster said there:

I think the biggest example here is a link penalty. Some are manual and some are algorithmic. I also wonder if the warnings you get via Webmaster Tools, if they are for both manual and algorithmic penalties. I suspect both.

Forum discussion at WebmasterWorld.