These two are often confused. Many clients lose Organic Traffic and say they've been "penalized", when in fact that may not be the case. See the difference between the two below:
When Google launches an algorithm update, they typically don't communicate about it unless it's an extremely large update. We monitor SERP volatility to help inform us when changes are made in search results.
If a website is impacted by an algorithmic update, we call this an "algorithmic devaluation" because Google simply may not be finding your website as valuable as before using new criteria, OR they're finding competitors more valuable.
Recovering from an algorithmic devaluation can be tricky and sometimes require overhauls in content and/or strategy
Manual penalties are typically more serious offenses in the eyes of Google. However, the good part here is that we'll actually get direct communication about what the problem is in Google's Search Console tool.
Knowing what the problem is helps us nail down exactly what happened so that we can address it more quickly than an algorithmic devaluation (usually).
We can then communicate with Google through the tool once we believe the issue has been resolved, and in most instances we see a very quick recovery post completion.