Penalties

Overall philosophy.

mistakes happen, they may get warnings (see below)
repeated mistakes can cause penalties
voluntary actions (e.g. blocking or driving off-track) are punished without warnings.
incidents in a pack (typically lap 1) can be penalized. Causing an accident by taking unnecessary risks early in the race may result in harsh penalties.
unsafe rejoins, typically after a spin, are sanctioned, please pay attention.

Incidents Report and Safety Points

Incidents reports are posted after the races, usually on Saturday.
The purpose is for all of us to learn from mistakes, not to punish or shame anyone.
If you want the race stewards to look at something, you must send a Private Message to the Organizers, indicating driver name and lap (and corner if you can). No replay is necessary.

The Incidents Report shows warnings, penalties (if present) and safety points.

Safety Points are just a gross indication of the severity of an incident. They are not points deducted from the standings; there is not a fixed amount of points resulting in a penalty or else. They are also used as quick reference for stewards.
Incidents leading only to safety points are not extensively analyzed and are not discussed by a panel of stewards. If you got a 3 and think it should be a 2 (see below), don’t worry: it does not impact anything.

Generally speaking, Safety Points represent:

1 – a small mistake resulting in an accident. For instance, a driver gets 1 SP if he spins by himself and is collected by another car.
2 – the driver caused an accident directly but due to a minor mistake. A legitimate pass attempt ending in contact, for instance
3 – The driver caused an accident with a significant mistake. A late attack causing contact; squeezing the other driver off-track; rear ending another car at apex etc.
4 – A significant infraction to the rules. Blocking, pushing another driver off-track etc.
5 – Something really bad, just don’t do it 😉 Intentional wrecking would get a 5, for instance.

WARNINGS
Warnings are a way of telling a driver to have a look at what he did.

Minor warning, or ‘watch’: a small error causing an accident. There is something worth learning from the replay
Warning: you did something wrong, please don’t repeat the mistake. A bad pass attempt generally falls here.
Major warning: you did something very wrong; next time it might be a penalty. Corrective actions need to be taken
Penalty. Details are indicated. They include DQ (zero point in the past race); time penalty added post race; skipping qualify in the next race; race suspension (you cannot attend the next race); points decurted from the standings and similar.
Warning Lap 1 – This is a special case. You did something wrong, even minor, in lap 1. Being in the early race, it carries a more severe slap on the wrist. The purpose is to avoid troubles in the early race, when an incident can be catastrophic in a crowded field.
If you spin on lap 1, for instance, you will get a ‘warning lap 1’ even if you only get 1 safety point (innocent mistake).

Warnings are not heavily scrutinized by a panel of stewards. If you think you should have not gotten a minor warning… just live with it; it is not a problem and it will not affect you.
By contrast, penalties are always discussed by a panel of stewards and replays are watched at length.