During the Cooper Gang's trip to Holland in Sly 3: Honor Among Thieves, they sought to take down a notorious fighter pilot known as The Black Baron. After defeating Black Baron, "he" was unmasked, to reveal that he was really Penelope all along. As the Black Baron, Penelope founded the ACES Dogfighting Competition, and was the champion of it every year. Penelope used the alias of Black Baron to bypass the age restriction requirements. This showed how brilliant Penelope was- that even at an age considered too young, she still dominated against older and experienced competition. However, Penelope had been living a double-life as the Black Baron, and admittedly felt a sense of relief when defeated by the Cooper Gang, since it meant Penelope could be herself.
After her defeat, Penelope officially ditched the life as Black Baron, and joined the Cooper Gang as their RC specialist. Penelope would prove to be a very valuable asset to the Cooper Gang and played a huge role in their mission to get into the Cooper Vault in Sly 3. As her time unfolded in Sly 3, Penelope formed a romantic relationship with Bentley.
After the Cooper Vault mission was complete, Penelope and Bentley started to work on a time machine. However, Penelope eventually disappeared and joined forces with Le Paradox, the main villain from Sly Cooper: Thieves in Time. Penelope did this because she wanted to disconnect Bentley from the Cooper Gang, as she saw potential in Bentley to be more, to take over the world. She was eventually defeated by the Cooper Gang and put in jail. However, she would then escape, and never be heard of since.
One could classify Penelope as a hero or a villain, depending on which part of her life is to be focused on.