They're shit stocks of shit companies. Usually a single share is sold for fractions of a dollar, ie. pennies, hence the name.
Back when mutual funds/index funds didn't exist, cheap stocks made some sense for the small investor since having a diverse portfolio required a lot of capital. Nowadays they're obsolete. From this you can tell that the reason they exist is to appeal to idiots who are so uninformed about investing, they don't even know what mutual funds are. And the con artists who scam them.
>buy lots of cheap penny stock
>send spam saying "buy now will go up x100000 tomorrow"
>retards buy penny stock
>drive up price
>sell your position and cash in
>when retards see you dumping some panic sell
>downward feedback loop
Basically a way of moving money from very ignorant people to your pockets. No serious investor will touch them, no serious company will IPO at pennies - which is great for scammers, the less big players (who are hard to scam) there are the smaller the market cap, the easier it is to manipulate. That's why people like >>697 say they are turbulent.
If you "don't have a lot of money", just go and buy a fucking index fund or something. Like your poor ass is gonna know shit about buying individual stocks anyway. That's assuming "not a lot of money" means like, a couple dozen grand, as in, not millions. If you have <1k, shit nigga what are you doing go pay the rent before you get evicted lol.