What happens to the penguin after cancellation?
Don't worry, if your membership is canceled, your penguin account will remain active and you'll still be able to log in and play in Club Penguin as a free player.
However, all member-only items will be placed into your storage and won't be usable. If you sign up for a new membership you'll be able to access them again.
You'll be able to use any items you unlocked from the Treasure Book and will also be able to care for any puffles you've adopted.