If Google Webmaster Tools says that your site has been penalized, there are some actions to take. Unfortunately, not every penalty can be removed. Not every site will recover from a penalty. If you had a good site with quality linking that historically was “natural”, but during a period of time went spammy, then there is a chance of recovery. For example, maybe the webmaster hired a new SEO company that unbeknownst to them engaged in unnatural activities. In this case it may be possible to recover to the point PRIOR to the era of spammy linking.
However, a penalty and a drop in rankings are two different things. This may just be a drop based on the algorithm not recognizing the bad links
If this is a penalty, you are in trouble. If this site has lived entirely in an unnatural capacity, then it may not come back.
Regarding timing: Google only wants you to submit a reconsideration request if this is a manual review. If you get a “no manual spam actions found”, then the algorithm change is the cause and you had better get with the new “rules”.
The realty varies situation to situation. In some cases its not going to happen and you need to start over, in others its an algorithm change that needs some clean up.
