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But since there is very many domains which is hosted in a shared hosting environment, they often can't ban the ip.
Google also have acces to the whois database, so if you get 1 domain banned (both ip and domain), it's pretty good chance that you might get all the other domains registered in your name banned. (These ban's are sometimes handpicked by Google Staff)
It's very hard, because there is a numerous of different penalizations.
But, either your site completly drops from the index (which can also be due to server down etc).
Or you are nowhere to be found on the SERP'S (Search engine results pages), and if you search for your domain, you end you end up last in the serp's.
Related thread:
Are we being penalized on google? [webmasterworld.com]