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Well, their TOS says it all. Google has made it clear that any automated queries on the Google servers are against their TOS, particularly rank checking programs. You won't find many discussing these programs as they wish to remain below the radar, so to say.
I think the number of penalties relative to rank checking software are very minimal and usually imposed when there is severe abuse. I read many topics where people say they do it all the time and its not had any effect on them yet! There have also been a few threads here where someone was asking about a penalty they had and GoogleGuy clearly stated that it was their use of a particular rank checking program.
That link is loaded with great information and since a lot of questions are covered time and again, it's a great way to familiarize yourself with this site.
If you really feel the need to use an automated software to check your rankings, the Google API gives you access to 1,000 automated queries per day.