It is bordered by Kedah in the north and east, and Perak in the south. Penang is the second smallest Malaysian state in area after Perlis, and the eighth most populous. It is composed of two parts — Penang Island, where the seat of government is, and Seberang Perai (formerly Province Wellesley in English) on the Malay Peninsula.

Highly urbanised and industrialised Penang is one of the most developed and economically important states in the country, as well as a thriving tourist destination. Penang has the third-highest Human Development Index in Malaysia, after the state of Selangor and the federal territory of Kuala Lumpur. Its heterogeneous population is highly diverse in ethnicity, culture, language, and religion. A resident of Penang is colloquially known as a Penangite.

Penang has a tropical climate, specifically a tropical rainforest climate bordering on a tropical monsoon climate, though Penang does experience slightly drier conditions from December to February of the following year. The climate is very much dictated by the surrounding sea and the wind system. Penang's proximity with Sumatra, Indonesia makes it susceptible to dust particles carried by wind from perennial but transient forest fires, creating a phenomenon known as thehaze.

Visited by Somerset Maugham, Rudyard Kipling, Noël Coward and Queen Elizabeth II among many others, Penang has always been a popular tourist destination, both domestically and internationally. In 2009, Penang attracted 5.96 million tourists, ranking third in tourist arrivals in Malaysia. Penang is known for its rich heritage, multicultural society and its vibrant culture, its hills, parks, and beaches, shopping, and good food. There are a variety of accommodation options from guest houses and budget hotels to four- and five-star hotels. For staying at a room for one night, guests are required to pay a bed tax around RM2 to RM3. Penang has been ranked by Yahoo! Travel as one of the "10 Islands to Explore Before You Die"and listed in Patricia Schultz's best-selling 1,000 Places to See Before You Die travel book.

The most popular beaches in Penang are located at Tanjung Bungah, Batu Ferringhi, and Teluk Bahang, and these contiguous beaches are home to Penang's famed hotel and resort belt. More secluded Muka Head, which hosts a lighthouse and a marine research station, and Monkey Beach – both within the Penang National Park – offer more pristine water.

Pollution which has been going on for years taints the beauty of the beaches and increasingly turns tourists away to places likeLangkawi and Pangkor. Among the identified sources of pollution include inefficient sewage disposal and unchecked commercial activities.

Famed for its food, Penang is a food haven visited by the Malaysian locals as well as foreign tourists. Touted the food capital of Malaysia, some of the best of Penang food can be found at Gurney Drive. The popular seafront promenade offers both delightful street and high-end cuisine.