The SRD has added the line about no multiclass penalties though. Where they got it from I'm not sure, but one of the rumors is that a designer gave a very strong opinion that XP penalties shouldn't apply.
It was in the 3.0 DMG, but isn't in the 3.5 DMG. The second paragraph of the 3.0 DMG contains the following:
3.0 DMG said:
Characters who qualify can choose a prestige class as a multiclass to pick up as they advance in level. Taking a prestige class does not incur the experience point penalties normally associated with multiclassing.
Why this wasn't addressed in the errata I'm not sure, but the designers are on record as saying that the first 3 paragraphs of the 3.0 DMG PrC section (a fluff intro paragraph, the above "like multiclassing but not" paragraph, and a paragraph stating that PrCs shouldn't be available for characters until 5th or 6th level) shouldn't have been cut and were intended to still apply to 3.5 PrCs.
Regarding the general thread topic, I don't enforce multiclass penalties, for a few reasons. As already stated, the favored class systems means that new classes aren't as supported as existing ones even when the new ones are a much closer fit for the race flavor-wise; when tiefling hexblade/warlocks and elf ranger/scouts are taking penalties relative to tiefling rogue/warlocks and elf ranger/wizards, you know something is screwy. Also as already stated, the penalty completely fails in its objective because (A) it attempts to make Class 1 X/Class 2 Y/Class 3 Z/etc. builds unappealing relative to single-class or 50/50 split builds, yet a 2/2/2/2/2/2 multiclass takes no penalty while a 7/5 multiclass does and (B) it hopes to enforce a power/flexibility parity yet casters are better single-classed and martial characters are better multiclassed.
Speaking of martial class multiclassing, the reason that many people here seem to want to keep the penalty is exactly why I want to remove it. The barbarian is apparently too front-loaded according to frankthedm, and others have said the dips are bad because you get too much for a single-level investment. On the contrary:
every class should give that many abilities at
every level, and the fact that they don't is a failing of 3.5. A 1st level barbarian gets rage, fast movement, martial weapon proficiency, light and medium armor proficiency, good HD, good Fort, and full BAB. A 1st level monk gets a bonus feat, flurry of blows, extra unarmed damage, extra speed, Wis to AC, all good saves, and good skills. A 1st level wizard gets 3+Int spells known, 4 spells per day, a familiar, good Will, and Scribe Scroll. They're relatively even in terms of number and power of options granted. Most classes are like that for the first 2-5 levels. Then, however, you get to the "PrC out now!" level range, and while at 7th level the wizard gains 2 spells known and 1 1st and 1 4th level spell per day, the monk gets a point of BAB and some self healing (in an amount that is eclipsed by a
single casting of the
cure critical wounds that his 7th-level cleric buddy got on top of access to every other 4th-level cleric spell) and the barbarian gets a point of BAB and DR 1/-- (which does practically nothing against CR-appropriate monsters like the bulette, who deals at least 4d8+2d6+20 per round with 3 attacks and more with Leap). The 7th-level fighter gets nothing but a point of BAB, as does the paladin.
By the time you get to higher levels, it's even worse. A 17th-level barbarian gets the ability to ignore post-rage fatigue and a point of BAB. A 17th-level paladin gets a single 3rd-level spell per day and a point of BAB. A 17th-level monk gets the ability to talk to things and the ability to ignore age penalties. A 17th-level fighter gets nothing but a point of BAB. Meanwhile, a 17th-level core caster gets two of
wish, miracle, astral projection, or
shapechange. That is embarrassingly bad for the martial types, even the ones who get real class features. DMs should
encourage martial characters to dip frequently, because that's the only way for them to get worthwhile class features after a while. Ideally, martial classes should be getting 2-3 good, useful class features per level (plus some optional flavor BS like "can avoid falling damage while near a wall, but not nearly as well as a level 1 spell" and "can ignore some damage, but not in quantities that actually matter"), but until someone rewrites all the classes to accomplish that, dipping shouldn't be vilified but rather encouraged.