This name was originally applied to the great auk of the North Atlantic (now extinct). In the narrative of Hakluyt's voyages, Ingram (probably writing in about 1582) remarked that this seemeth to be a Welsh name and Celtic scholars have been very happy to accept this explanation (pen gwyn meaning white head in Welsh) ascribing the name to Welsh (or Cornish or Breton) sailors. However, the great auk in fact only had a white spot in front of each eye. And it seems odd that English-speaking sailors should pick up a word from Welsh (or Cornish or Breton). (The great auk's other English name garefowl is from Norse, a language much more associated with North Atlantic seafarers.)
The name penguin was first reliably reported from Newfoundland in a letter of 1578, also given in the account of Hakluyt's voyages. But in Newfoundland the name is said usually to have been pronounced pin-wing. This accords with another theory that the bird was originally called the pin-wing with reference to its curiously rudimentary wings. It would also explain why, as early as 1588, the term was being applied also to the southern birds which we know as penguins today and which also have rudimentary wings (but not white heads). However, there is not much hard evidence in support of this theory either. A third suggestion, that the Latin word pinguis fat is somehow involved seems implausible on linguistic grounds, though it may have influenced the spelling of the auk's Latin name Pinguinus.