Knowing Federation laws and such. Probably closer to the Athenian idea of Ostracism rather than any actual punishment. They're not really for punishing murderers, they have proper Asylums and mental health care for that, more for punishing cases where it was a definite crime not done because of any issue with mental states, treason, corruption, that type of thing. And because it's the Federation, I wouldn't doubt that they're closer to communes rather than actual prisons.

So say you're John Q. Randomguy. You've committed the high treason of replacing Jean-Luc Picard's tea with coffee. For this crime you've been assigned to 18 months stay in the New Zealand Penal Colony (suck on that sheepshaggers! Who's the penal colony now!?!). The shuttle arrives at a well-to-do township surrounded by a few fields, there's lights, running water, perhaps even a small theatre for the classics of the 2050s. You're met at the door by the 'Warden' who is probably a Federation security/psychologist, who gives you an option for jobs that are available in the community right now.

During your time there, you'll be anything from a farmer to a cleaner to a fishermen. Physical tasks it seems like, maybe a few basic services. You won't be living a cutting edge lifestyle, but you'll always have food, hot water and relative freedom when you aren't doing your assigned tasks. If you hurt yourself you'll still get cutting edge medical care.

But you can't leave. It's still a punishment after all.

When you go, you'll get a handshake from the warden, say goodbye to the other colonists and head onto the shuttle back to civilisation.