This phrase is code for marajuana. Teenagers in japan have named it after a kid from an ancient japanese folk-tale. Penn Chan would act as though he was high all the time. The kids saw it to be a fitting code name so the phrase is now commonly used in asia and has recently spread to the states.
Dude that Penn Chan was grade A.
A code word for that marijuana smoke that we use here in asia, can't believe it spread to UD.
lets pretend we're asian by smoking penn chan and then jerking off to hentai!
Its a code name that Japanese kids use to describe the weed plant, so that adults won't know what their talking about.
Person1: Hey Miko pass the Penn chan!