This is correct!
If you have nonrefundable fares and cancel, the money goes into a Southwest travel fund (it's just like having a credit with Southwest), which you can use to book other flights to wherever Southwest flies. However, as slruud said, you have a year from the date you booked your original flight to use the funds. If you don't use the funds within that time, then bye-bye money.
You won't have to pay any penalties.